SATS pays €1.3bn for WFS

July 2023 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

July 2023 Issue

SATS Ltd has agreed to acquire global air cargo logistics provider Worldwide Flight Services (WFS) from an affiliate of Cerberus Capital Management in a deal worth €1.3bn.

The deal, completed in early April 2023, received a vote of overwhelming support – 96.8 percent approval – from SATS’ voting shareholders in January this year and obtained regulatory approvals in all relevant jurisdictions in February. Following completion, WFS will become a fully owned subsidiary of SATS, which is headquartered in Singapore. WFS will continue to be headquartered in Paris and to operate as Worldwide Flight Services. Craig Smyth, chief executive of WFS, will continue to run the company and report to Kerry Mok, president and chief executive of SATS, and an advisory board.

The deal is expected to be a significant one for SATS, with anticipated increases in earnings before interest, taxes, depreciation and amortisation (EBITDA) of around $69.6m through cost-cutting alone. The combined companies expect to capture synergies via cross-selling, network expansion, global e-commerce cargo partnerships, accelerated cargo automation and reinforcing downstream cargo logistics. With WFS in a healthy financial position, the Singaporean ground services giant expects to see earnings per share rise by 78 percent and revenue to jump by 200 percent.

“Recent global events have highlighted the importance of supply chain resiliency and an interconnected global network of cargo handling capabilities that provides speed, traceability, and certainty to our customers,” said Mr Mok. “SATS and WFS will provide our customers with the critical global cargo handling capability, and the scale advantage for us to develop and pioneer new solutions that will enhance our customers’ competitiveness. We welcome the management team and employees of WFS into the SATS family. Our focus is now on accelerating value creation for our customers over the medium term.”

“Our combination with SATS enhances our ability to provide end-to-end trade solutions, which is increasingly critical to our global customers,” said Mr Smyth. “Together, we will drive technology and service innovations while maintaining our industry-leading standards of safety and security. We are very excited about the value we can deliver for customers from our combined capabilities and broader network.”

“We are incredibly proud to have partnered with WFS and its talented team,” said Craig Brooks, senior managing director at Cerberus. “Over the past four and half years, WFS invested in its technology and operations, achieved tremendous growth, and persevered through the COVID-19 pandemic. This strategic combination with SATS will support the company’s continued success and deliver great value for its customers.”

WFS is the world’s largest air cargo handling firm with a strong presence in North America and Europe, complementing SATS’ dominance in Asia. It has annual revenues of €1.8bn and more than 30,000 employees serving over 300 customers at 164 major airports in 18 countries. SATS is operational in over 60 locations across 14 countries. The combined company will cover trade routes spanning 50 percent of the air cargo market in this highly competitive industry. WFS is currently present in half of the top 10 cargo in North America and Europe, the Middle East and Africa (EMEA), namely Chicago, Frankfurt, Los Angeles, Miami and Paris. Meanwhile, SATS is present in four of the top 10 Asian hubs, namely Beijing, Hong Kong, Taipei and its home market Singapore.

The deal is expected to be financed via a balanced mix of term loan and a renounceable underwritten rights issue, with the remaining amount financed by internal cash balance. The term loan will be a three-year euro denominated term loan equivalent to approximately S$700m from SATS’ principal bankers. The loan has an all-in cost of 4.0 to 4.5 percent per annum based on prevailing Euribor and is comparable to the terms of SATS’ existing borrowing facilities.

Richard Summerfield