Singapore's SATS in $1.1 billion deal to become the biggest air cargo handler

Singapore-based ground handling and catering provider SATS Ltd (SATS.SI) is acquiring Paris-based Worldwide Flight Services (WFS) for 1.19 billion euros ($1.14 billion) cash in its largest ever deal, to create the world's biggest global air cargo handler.

The combined entity's network covers trade routes responsible for more than 50% of global air cargo volume, the companies said in a statement on Wednesday.

SATS' CEO Kerry Mok called the deal "a transformational opportunity for SATS", saying it would create a global leader.

SATS said the transaction values WFS at an enterprise value of 2.25 billion euros, and it would raise S$1.7 billion in equity to fund the purchase.

SATS is buying WFS from an affiliate of U.S. private equity firm Cerberus Capital Management.

It said the deal would propel the group to the number one spot in an industry that includes aviation services firm Swissport and global airport and travel services business dnata.

SATS has a market value of S$4.35 billion ($3 billion) and counts Singapore state investor Temasek Holdings as its single biggest shareholder, according to Refinitiv data.

SATS said Temasek, which holds a 41% stake, had provided an irrevocable undertaking to vote in favour of the transaction.

Last week, Bloomberg News reported that SATS had sounded out financing for a possible deal that could be worth about $3 billion.

SATS had told the Singapore bourse that it was in talks to buy WFS but said the Bloomberg report contained "materially inaccurate facts".

Trading in shares of SATS, which have dropped 5.4% over the past week, was halted earlier on Wednesday.

SATS said the purchase would be "immediately financially accretive" on a proforma basis and raise SATS' earnings per share by 78% to 3.2 Singapore cents from 1.8 cents reported for the year to March, and increase revenue by more than 200%.

WFS reported 1.722 billion euros in revenue and earnings before interest, taxes, depreciation, and amortization of 232 million euros for the year ended March 2022.

Founded in 1984, WFS is the world's largest air cargo logistics provider and a major provider of ground handling and technical services. It has more than 300 customers and employs 32,300 staff, the company said.

SATS said it had committed funding in place to finance the purchase of WFS through an acquisition bridge facility. The base funding plan comprises internal cash and an equity fundraising from existing shareholders and new strategic investors.

The deal is expected to be completed by March 2023.

BofA Securities is the lead financial adviser on the deal while DBS Bank is the financial adviser.