Exchange Income to buy Provincial Aerospace for $246m

Exchange Income (EIC) has signed a deal to acquire Provincial Aerospace (PAL), a Canada-based aerospace and aviation firm, for around $246m.

Headquartered in St John’s, Newfoundland and Labrador, PAL operates a fleet of 30 aircraft under its aerospace business, primarily comprised of Dash 8s and Twin Otters. It generates revenues of $185m.

The company has three distinct businesses, Provincial Aerospace, Provincial Airlines and PAL Aviation Services.

EIC plans to finance the acquisition by issuing common shares valued approximately $12m, and using available cash resources from its currently unutilised credit facility.

Subject to regulatory approval, the transaction is expected to be completed in late 2014 or early 2015.

EIC said that the acquisition would be significantly accretive to its earnings and free cash flow, while reducing its payout ratio.

EIC chief executive Mike Pyle said: "While the airline business and FBO operations are similar to our existing aviation segment, their aerospace division is a new revenue source for us."

PAL chief executive Brian Chafe said: "We have built a diverse set of operations, which fits in well with EIC’s business model.

"This is an exciting transaction for PAL and we look forward to being part of the EIC family."

Provincial Aerospace is engaged in intelligence, surveillance, reconnaissance and maritime patrol aircraft operations and systems.

Provincial Airlines provides scheduled charter and cargo services and operates 210 weekly scheduled and charter flights in Newfoundland and Labrador, Quebec, New Brunswick and Nova Scotia.

PAL Aviation Services has aircraft refueling, ground handling and aircraft facilities and runs fixed base operations at two locations, Halifax, Nova Scotia and St. John’s, Newfoundland and Labrador.

EIC is an acquisition-oriented company focused on aviation services and equipment, metal manufacturing, and infrastructure services.