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Summary
- Signature Aviation Plc has received two competing takeover offers recently
- The Board of Signature has rejected the GIP proposal after evaluating both the offers.
- GIP and Blackstone are supposed to show their intent to bid or walk away till 14 January.
The shares of UK-based global aviation support services provider Signature Aviation Plc (LON:SIG) rallied after receiving two competing takeover offers recently. The company’s stock surged by more than 40 per cent on 17 December from its previous day closing price. The stock closed at GBX 375.40 and was valued at £3.1 billion.
Notably, Signature Aviation shares have delivered a double-digit price return of 17.39 per cent in a year’s time. The recent rally in the share price movement can be attributed to the possible cash offer of $5.17 per Signature share for the entire share capital made by Blackstone Infrastructure Advisors LLC and Blackstone Core Equity Management Associates LLC, together referred as Blackstone.
The pandemic has weighed down heavily on the overall aviation sector. The shares of Signature plunged lower prior to yesterday’s trading session.
Also read: Impact of the Pandemic on the Performance of Two FTSE Stocks – Easyjet & Signature Aviation
Second offer
Another possible cash offer for the entire issued and to be issued ordinary share capital of Signature came from Global Infrastructure Partners (GIP) which was at a lower price than the Blackstone proposal. The Board of Signature has rejected the GIP proposal after evaluating both the offers.
The demand for private jets has been increasing, and this takeover bid by Blackstone and GIP is a bet on Signature as it provides class leading bases and services.
The aviation sector is one of the worst hit sectors due to the pandemic crisis. However, the private jet industry seems to be a bit immune, in contrast to the overall aviation sector. As the high net worth and wealthy individuals are willing to pay for flights that allow social distancing, the private jet sector is expected to bounce back quicker than the conventional commercial airlines.
According to UK takeover rules, GIP and Blackstone are supposed to show their intent to bid or walk away till 14 January. However, they might opt for a deadline extension, if required.
Signature’s financials
Signature reported a 31 per cent fall in revenues and a 60 per cent drop in operating profits to $63 million during the H1 of FY2020. The company has deferred dividend payments to preserve cash to sail through the current uncertainties.
Assuming stable flight activity at around 80 per cent of 2019 levels, Signature expects better performance in H22020. The board envisions the growth of the company by leveraging upon its market leading fixed-base operator (FBO) business model and its resilience. The company has focused on cost optimisation for both corporate and individual FBO. In addition, the group has maintained strong liquidity with a total facility headroom and cash of $462 million.
Since September, the B&GA flying activity has been relatively stable. Moreover, the US flight activity was at 80 per cent of the October 2019 levels. The company aims to bring down carbon emissions substantially by 2025.
Formerly known as BBA Aviation Plc, Signature Aviation is an FTSE 250-listed fixed base operation network company focused on servicing the business and general aviation by providing technical support, fuel-related services and aircraft management.
