The masses scrambled to buy essential supplies when the pandemic began. US billionaires are now tussling to acquire essential suppliers to private jet operators. Buyout firm Blackstone is teaming up with Bill Gates’ investment group Cascade for a potential £3.1bn ($4.3bn) offer for full control of UK-listed Signature Aviation.
Demand for private aviation has soared as the world’s wealthy shun commercial flights in favour of lower-risk private and charter services. The largest operator of services for private jets in the US could therefore attract higher bids from the likes of Carlyle Group and Global Infrastructure Partners.
Although Mr Gates already owns a fifth of Signature — whose old name was BBA — shares traded well above the mooted 380p offer price on Friday.
Signature Aviation acquired Landmark Aviation from Carlyle in 2016, which left it with the biggest network of operations at US regional airports. Further acquisitions are unlikely and private capital now sees an opportunity to impose greater efficiencies — and lots more leverage.
Jets for the ultra wealthy may be in demand, but Signature relies on the wider business of general aviation, a function of US economic activity. Flights across Signature’s airports were 20 per cent below 2019 levels in October as activity remained subdued. Fuel sales account for an estimated three-quarters of group revenues.
Shares were recently cruising a fifth below where they started the year. The Blackstone/Cascade offer values the stock 20 per cent above pre-pandemic levels. That is a tolerable 15 times ebitda estimates made before the epidemic and about a quarter above the historical valuation range.
Recovery to pre-pandemic earnings will come in time. Signature has a decent business model underpinned by growing numbers of wealthy folks seeking private flights. Warren Buffett-owned NetJets is Signature’s biggest customer, supporting demand through its shared ownership model. This “democratisation” of private jet ownership grants freedom to those who can afford it. The masses should at least be able to get a decent price for their Signature shares.
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