Gama Aviation PLC Merger to create US Aircraft Management Business (1256T)

TIDMGMAA TIDMBBA

RNS Number : 1256T

Gama Aviation PLC

03 January 2017

Gama Aviation Plc (AIM:GMAA)

Gama Aviation Plc teams with BBA Aviation Plc to create the US's largest Aircraft Management Business

Gama Aviation Plc ("Gama Aviation" or the "Group"), the global business aviation service provider, today announces the merger of its US aircraft management and charter business with that of BBA Aviation Plc ("BBA Aviation"), as of 1(st) January 2017.

With the addition of over 90 aircraft to Gama Aviation's current US managed fleet, the combined business, with over 200 aircraft under management, will become the US's largest aircraft management business. Customers will benefit from the scale of the combined business through enhanced national and global service coverage and improved buying power resulting in lower costs. They can also benefit from the comprehensive line maintenance support provided by Gama Aviation's US Ground business as well as the market-leading FBO services provided by BBA Aviation's 'Signature Flight Support' network.

Highlights

Ø Creates a market leading platform for Gama Aviation and BBA Aviation to expand their presence in US, the single biggest business aviation market in the world.

Ø Provides national geographical coverage with BBA's predominantly West Cost based fleet complementing Gama Aviation's currently East Coast centric business, creating a national network to enable further growth in this highly fragmented market.

Ø Extends and diversifies Gama Aviation's client base.

Ø Expected to deliver significant additional growth for Gama Aviation's US Ground business through the ability to cross sell maintenance services to the additional aircraft now under management.

Ø Expected to deliver significant cost synergies of not less than $2M over two years.

Ø Expected to be earnings neutral in 2017 and 2018 and earnings enhancing thereafter, before the benefits of cross selling maintenance services into the enlarged fleet.

Gama Aviation's current US aircraft management and charter business interests are operated by its 49% owned associate Gama Aviation LLC, whilst those of BBA Aviation are operated by its 100% owned subsidiary Landmark Aviation through its air carrier operating subsidiary, Sterling Aviation LLC.

Pursuant to the agreement reached, Landmark Aviation will contribute 100% of its ownership in Sterling Aviation LLC into Gama Aviation LLC. Gama Aviation Plc will transfer its 49% ownership in Gama Aviation LLC into a new holding company, GB Aviation Holdings LLC, which will be owned 50:50 by Gama Aviation and BBA Aviation reflecting the near equal contribution of current profits by each party. Historically, in the year ended 31(st) December 2015 through a combination of branding fee and its 49% interest in Gama Aviation LLC a contribution to Group profit before tax of $4.3 million was delivered by Gama Aviation's aircraft management activities; in the same period BBA Aviation's US aircraft management activities delivered profit before tax of $5.5 million.

Gama Aviation LLC will continue to manage and operate the combined businesses going forward and will trade its new service offerings under the brand name Gama Aviation Signature Aircraft Management. Gama Aviation's US Ground business remains a 100% wholly owned subsidiary of the Group.

Under the terms of a new licensing and branding agreement, Gama Aviation LLC will continue to use the Gama Aviation brand and IP, and will also be able to use BBA Aviation's Signature Flight Support brand name. The annual fee has also been increased and fixed and will be shared between BBA Aviation and Gama Aviation. This will reduce the existing branding fee contribution to the Group whilst increasing the contribution to the Group's income from associates.

After taking into account the build up of cost synergies, the transaction is expected to be earnings neutral in 2017 and 2018 and earnings enhancing thereafter. This is before any benefit from cross selling of Gama Aviation's comprehensive maintenance services into the immediately enlarged fleet or the future growth opportunities expected to be derived from Gama Aviation Signature Aircraft Management's market-leading platform.

Gama Aviation will issue a trading update for the year ended 31(st) December 2016 on Monday 9(th) January.

Commenting on the transaction, Marwan Khalek, Chief Executive of Gama said:

"We are delighted to announce this exciting deal and to be teaming up with BBA Aviation in the US. The enlarged business creates a market leader and an unrivalled platform for growing our share of this massive business aviation market. The combination diversifies our customer base and extends our network coverage nationally whilst simplifying the financial arrangements with our US partners. As part of this strategically important transaction, we are also excited by the potential to cross sell our US maintenance services into the enlarged fleet."

Simon Pryce, Chief Executive of BBA Aviation, said:

"This agreement marks another milestone for BBA Aviation, creating a leading charter and fleet management company, whose scale will benefit both us and our customers. We look forward to working with our partners at Gama Aviation to develop and grow the new company in the years ahead."

ENDS

For further information please visit www.gamaaviation.com or contact:

   Gama Aviation Plc                                           [phone] 

Marwan Khalek, Chief Executive Officer

Kevin Godley, Chief Financial Officer

   Camarco                                                          [phone] 

Ginny Pulbrook

Geoffrey Pelham-Lane

   Jefferies International                                     [phone] 

Simon Hardy

Harry Nicholas

Gama Aviation - Notes to Editors

Gama Aviation (GMAA) is a multi-disciplinary global aviation services company that specialises in providing support for individuals, corporations and government agencies. Following the reverse takeover by Hanger 8 in January 2015, Gama Aviation is now one of the top three global players in a highly fragmented market, with a fleet of 153 aircraft. Gama operates across Europe, the US, the Middle East, Asia and Africa.

Gama's services can be split into two broad areas: Air and Ground. The Air Operations include aircraft management, special mission and charters, with Ground Services covering maintenance services, Fixed Base Operator (FBO) operations and modification services.

http://www.gamaaviation.com/

BBA Aviation - Notes to Editors

BBA Aviation plc is a leading global aviation support and aftermarket services provider with market leading businesses and attractive growth opportunities. BBA Aviation's Flight Support businesses (Signature Flight Support and ASIG) are focused on refueling and ground handling of business and commercial aviation aircraft. Its Aftermarket Services businesses (Dallas Airmotive, H+S Aviation, International Turbine Service, Barrett Turbine Engine Company, International Governor Services and Ontic) are focused on the repair and overhaul of jet engines and the service of aerospace sub-systems and components. For more information, please visit www.bbaaviation.com

This information is provided by RNS

The company news service from the London Stock Exchange

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January 03, 2017 02:00 ET (07:00 GMT)