Menzies to buy Florida’s ASIG for £153m

John Menzies chairman Dermot Smurfit

John Menzies said it agreed to buy Orlando, Florida-based aviation and fuel services company ASIG from BBA Aviation for up to £153 million in what it called a “transformational” deal that would make the Edinburgh firm the world’s largest interplane fueller.

Menzies, the aviation logistics and news distribution firm, said the deal — its biggest ever transaction — would double the size of Menzies Aviation’s existing North American operations and grow Menzies Aviation’s staff numbers from 23,000 to 31,000.

“The combination of ASIG and Menzies Aviation will create one of the largest aviation services businesses globally … adding significant scale at major international gateways,” said Menzies.

ASIG currently operates at eight of the 10 busiest United States airports, four of the five busiest Canadian airports, and eight of the 10 busiest UK airports.

“In particular, the acquisition will strengthen the Menzies Aviation service offering at major intercontinental gateways such as London Heathrow, San Francisco, Denver and Los Angeles,” said Menzies.

ASIG is one of the largest independent providers of commercial airline services in the world.

It currently has operations in 88 locations in seven countries and is one of the market leaders for into plane (ITP) fuelling and fuel farm management (FFM) services in North America and the UK, where it also has ground handling operations.

For the year ended December 31, 2015, ASIG had revenues of $415.8 million (£272 million). 

The acquisition will be funded through a mixture of equity — via a fully underwritten rights issue — and debt.

The rights issue at a price of 343p per share will raise £75.2 million

Menzies shares rose about 4.4% to 618p after the deal was announced.

Menzies chairman Dermot Smurfit said: “This is a transformational deal for Menzies and will significantly increase Menzies Aviation’s footprint globally while also adding fuelling to our operations.

“The transaction will create one of the largest aviation services businesses in the world, doubling the size of our North American operations, while strengthening Menzies Aviation’s service offering at major international gateways such as London Heathrow, San Francisco, Denver and Los Angeles.

“The board is confident of realising significant cost synergies following the acquisition and it is expected to deliver material enhancement in underlying earnings per share in its first full financial year of ownership.”

Menzies has been under pressure from activist shareholders to split into two separate companies in aviation and distribution.

One activist investor, Shareholder Value Management (SVM), which controls more than 7% of the company, had also urged Menzies to pursue deals.

“We are still very vocal about advocating for a split,” SVM analyst Gianluca Ferrari told Reuters.

“Nevertheless, it has always been our view that the industry needs consolidation.

“The two things are not mutually exclusive. I think the scale will increase value.”

Forsyth Black, managing director of Menzies Aviation, told Reuters the company had the support of big shareholders for the deal.

“A lot of the major shareholders … are supportive of this deal and with regards to splitting the group, this doesn’t change anything.”

“We’re doing the work to look at various options,” Black added.

Smurfit said last month it could take up to a year to decide if Menzies should split into two companies, partly due to complications with the groups’ pension schemes.