Mtha Aviation and SKMT Sunrise Investment Group, through new company Oakleaf Investment Holdings, have taken a 25% black empowerment stake in airline group 1time Holdings at a price of R65.1 million. Mtha and Sunrise own 83% and 17% of Oakleaf, respectively. At the end of June 1time had a market capitalisation of R225 million.
“Oakleaf has been incorporated as an investment holding company, whose sole purpose will be to acquire and hold an equity stake in 1time,” 1time said in a Stock Exchange News Service announcement. As part of the deal, Oakleaf will be entitled to appoint two non-executive directors and one executive director to the 1time board.
1time adds it will use the money to expand its airline, aircraft maintenance and charter businesses “and to increase the group’s BEE shareholding to realise its vision and strategy to create the largest
low cost airline in South Africa. The specific issue provides 1time with the opportunity to meet both of these objectives.”
The benefits that will accrue to the company as a result of the deal will include the ability of the BEE Consortium to add value to 1time’s business operationally and strategically; a capital injection to fund growth; assistance in respect of 1time’s transformation; and the creation of numerous synergies between 1time and Mtha, who holds 83% in the BEE Consortium, as the two companies operate in the same industry.
“The improved BEE shareholding will significantly strengthen the group’s BEE credentials, re-enforcing the group’s commitment to a multi-faceted approach to BEE, which aims to increase the number of previously disadvantaged individuals who manage, own and control the company.”
The SENS announcement adds 1time airline will utilise the funds for expanding its fleet, introducing Lanseria operations and introducing new routes into Africa. The aircraft maintenance business will utilise a certain amount of the capital raised to upgrade its facility “in various areas” and the charter business will use its share of the capital to expand its fleet.
Mtha Aviation has revenues of about R100 million a year and is involved in training of aviation personnel and aircraft maintenance, Business Day reported. Mtha MD Busi Maqungo said the company had been approached to acquire a stake in 1time. “It was clear from the beginning that any new investor needed to bring capital to the table in order to fund 1time’s expansion. Not only were we able to do that, we were a good fit for 1time in that we are also involved in the aviation sector.”
The deal may see a dividend from 1Time for the first time. “Any shareholder would like to see a return on their investment. Having reached a period of sustained earnings, the introduction of a dividend is likely to come up for discussion,” said 1time CE Glenn Orsmond.
In addition to the funds raised from the empowerment deal, 1time last month secured a R50 million standby equity distribution agreement with Yorkville Advisors, a US alternative investment manager. 1time can draw the funds in tranches in exchange for issuing new equity. The new shares will be priced at a discount to the market price at each draw-down.
1time Holdings in March reported R 82.6 million in attributable headline earnings for the year to December 31, 2009. In a SENS announcement at the time, 1time said group revenue increased by 19% from R1.049 million in December 2008 to R1.251 million “despite the generally difficult economic conditions and tough trading environment.” Revenue growth was underpinned by a 12%
increase in passenger volumes and increased revenue generated from then recently acquired maintenance facility Safair Technical. The strengthening of the Rand against the US Dollar translated to a R 16.6 million foreign exchange gain on the write down of foreign debt but also resulted in a currency based aircraft valuation impairment of R50.5 million.
Cash generated from operations for the year was “exceptionally strong” at R232.8 million compared to R58.9 million for 2008. The cash generated was utilised to acquire additional aircraft and to reduce debt.