The long-awaited consolidation of the offshore helicopter market began loudly this morning with the announcement that the Era and Bristow groups would merge in an all-stock, tax-free transaction to create a publicly-traded company with global operations, expected annual revenue of $1.5 billion, and more than 300 helicopters including the largest global fleets of Sikorsky S-92 and Leonardo AW189 and AW139 models. The merged helicopter fleets will be more than 80 percent company-owned with the remainder under “attractive lease rates.”
The combined company will be named Bristow, and Era Group CEO Chris Bradshaw will serve as CEO. Other senior management will be named “at a later date,” according to a statement issued this morning by Era. Combining the companies is expected to achieve $35 million in annual cost savings via the elimination of redundancies and through “substantial and highly achievable cost synergies.”
The new Bristow will have significant operations in the Americas, Nigeria, Norway, the UK, and Australia. Under terms of the proposed deal, Bristow shareholders would own 77 percent of the new company and Era shareholders would own 23 percent. The deal will be structured as a “reverse triangular merger” whereby Era issues shares to Bristow stockholders. Era shares will continue to trade on the NYSE. Those shares have lost more than half of their value since 2017 but were up sharply last night in after-hours trading. Concurrent with the announcement of the proposed merger, Era said its board authorized the repurchase of up to $10 million of its common stock between now and the mailing of joint proxy statement/prospectus for the merger.
The proposed merger was unanimously approved by the boards of both companies and is expected to close in the second half of the year, pending customary regulatory approvals. The combined company will have a nine-member board of directos, including seven members from Bristow and two members from Era, including the CEO. The board’s chairman and vice-chairman will be appointed by Bristow.
At closing, the new company is expected to have “a strong balance sheet” with $250 million in cash.
“We believe this merger will create substantial value for the stakeholders of both companies,” said Era CEO Chris Bradshaw. “The identified cost synergies are significant and, combined with the strong pro forma balance sheet and absence of capital commitments, support robust free cash flow generation. This merger achieves more efficient absorption of the significant fixed costs required to run an air carrier and better positions the combined company to manage industry challenges.”
Bristow CEO L. Don Miller said merging the two companies would build on Bristow’s safety and quality culture and “create an even stronger, more integrated industry leader.”
Bristow filed for Chapter 11 bankruptcy in May, claiming debts of $1.885 billion against assets of $2.86 billion, and successfully emerged from reorganization in October with $535 million of recapitalization. In filing bankruptcy, it joined a variety of financially-battered industry cohorts who had tread a similar path recently including PHI and CHC.
Era, which operated as many as 108 helicopters recently, telegraphed as early as April 2019 that it was available for a merger when CEO Bradshaw stated in the company’s annual report that the current offshore helicopter industry was “not sustainable” and “in dire need of consolidation.” As early as last summer rumors began to circulate the Bristow would merge with CHC and earlier this week there was widespread industry speculation that Era would combine with PHI.
“Consolidation will not only address the excess capacity in the industry, but will also facilitate better absorption of the significant fixed costs required to run an air carrier,” Bradshaw said last year, adding that the bankruptcies of Era’s competitors and helicopter leasing companies are likely to become a revolving door. “A simple, standalone equitization of these distressed balance sheets is unlikely to address the fundamental issues at play and may only lead to subsequent rounds of restructuring. In our view, the offshore helicopter industry is in dire need of consolidation, among both the operators and the lessors.”
Bristow has not been profitable in some time, losing at least $262.2 million for the nine months ended Dec. 31, 2018, including $85.94 million for the quarter ended on Dec. 31, 2018. While Era posted a modest net income of $13.9 million for 2018 on $222 million in revenues, that result included a $42 million settlement from Airbus Helicopters related to the grounding of H225 heavy helicopters in Era’s fleet. (Era had nine H225s at the time of the fleet's worldwide grounding in 2016, but only one remained at the end of 2018.) The 2018 results contrast with revenues of $231 million and a net loss of $28 million in 2017. For the quarter ended Sept. 30, 2019, Era posted a net loss of $1.9 million on revenues of $58.9 million.
The long-awaited consolidation of the offshore helicopter market began loudly with the January 24 announcement that the Era and Bristow groups would merge in an all-stock, tax-free transaction to create a publicly-traded company with global operations, expected annual revenue of $1.5 billion, and more than 300 helicopters including the largest global fleets of Sikorsky S-92 and Leonardo AW189 and AW139 models. The merged helicopter fleets will be more than 80 percent company-owned with the remainder under “attractive lease rates.” The combined company will be named Bristow and Era Group CEO Chris Bradshaw will serve as CEO. The remainder of senior management will be named “at a later date,” according to a statement issued this morning by Era. Combining the companies is expected to achieve $35 million in annual cost savings via the elimination of redundancies and through “substantial and highly achievable cost synergies.”
The new “Bristow” will have significant operations in the Americas, Nigeria, Norway, the United Kingdom, and Australia. Under terms of the proposed deal, Bristow shareholders would own 77 percent of the new company and Era shareholders would own 23 percent. The deal will be structured as a “reverse triangular merger” whereby Era issues shares to Bristow stockholders. Era shares will continue to trade on the NYSE. Those shares have lost more than half of their value since 2017 but were up sharply last night in after-hours trading. Concurrent with the announcement of the proposed merger, Era said its board authorized the repurchase of up to $10 million of its common stock between now and the mailing of joint proxy statement/prospectus for the merger.
The proposed merger was unanimously approved by the boards of both companies and is expected to close in the second half of the year, pending customary regulatory approvals. The combined company will have a nine-member board of directors, including seven members from Bristow and two members from Era, including the CEO. The board’s chairman and vice-chairman will be appointed by Bristow.
At closing, the new company is expected to have “a strong balance sheet” with $250 million in cash.
“We believe this merger will create substantial value for the stakeholders of both companies,” said Era CEO Chris Bradshaw. “The identified cost synergies are significant and, combined with the strong pro forma balance sheet and absence of capital commitments, support robust free cash flow generation. This merger achieves more efficient absorption of the significant fixed costs required to run an air carrier and better positions the combined company to manage industry challenges.”
Bristow CEO L. Don Miller said merging the two companies would build on Bristow’s safety and quality culture and “create an even stronger, more integrated industry leader.”
Bristow filed for Chapter 11 bankruptcy in May, claiming debts of $1.885 billion against assets of $2.86 billion, and successfully emerged from reorganization in October with $535 million of recapitalization. In filing bankruptcy, it joined a variety of financially-battered industry cohorts who had tread a similar path recently including PHI and CHC.
Era, which operated as many as 108 helicopters recently, telegraphed as early as April 2019 that it was available for a merger when CEO Bradshaw stated in the company’s annual report that the current offshore helicopter industry was “not sustainable” and “in dire need of consolidation.” As early as last summer rumors began to circulate the Bristow would merge with CHC and earlier this week there was widespread industry speculation that Era would combine with PHI.
“Consolidation will not only address the excess capacity in the industry but will also facilitate better absorption of the significant fixed costs required to run an air carrier,” Bradshaw said last year, adding that the bankruptcies of Era’s competitors and helicopter leasing companies are likely to become a revolving door. “A simple, standalone equitization of these distressed balance sheets is unlikely to address the fundamental issues at play and may only lead to subsequent rounds of restructuring. In our view, the offshore helicopter industry is in dire need of consolidation, among both the operators and the lessors.”
Bristow has not been profitable in some time, losing at least $262.2 million for the nine months ended Dec. 31, 2018, including $85.94 million for the quarter ended on Dec. 31, 2018. While Era posted a modest net income of $13.9 million for 2018 on $222 million in revenues, that result included a $42 million settlement from Airbus Helicopters related to the grounding of H225 heavy helicopters in Era’s fleet. (Era had nine H225s at the time of the fleet's worldwide grounding in 2016, but only one remained at the end of 2018.) The 2018 results contrast with revenues of $231 million and a net loss of $28 million in 2017. For the quarter ended September 30, 2019, Era posted a net loss of $1.9 million on revenues of $58.9 million.