Chorus Aviation (CHR) M&A Announcement summary

Deal rationale and strategic fit

• Sale of the Regional Aircraft Leasing (RAL) segment, including Falko, for CAD 1.9 billion unlocks significant embedded equity value, accelerates value creation for shareholders, and aligns with an asset-light strategy.

• The decision follows underperformance of the leasing business due to macroeconomic challenges and a slower-than-expected transition to an asset-light model.

• The transaction addresses persistent undervaluation in the share price and generates incremental value at a premium to book value.

• Post-transaction, focus shifts to core aviation services, leveraging strengths in Jazz, Voyageur, Cygnet, and new ventures.

Financial terms and conditions

• Aggregate sale price is CAD 1.9 billion ($1.9 billion), with CAD 814 million ($814 million) in cash and CAD 1.1 billion in assumed aircraft debt and non-controlling interests.

• Net proceeds per common share are estimated at $4.21.

• Proceeds will eliminate CAD 1.7 billion ($1.7 billion) in financings, including all RAL-related debt, most corporate debt, and Series 1 Preferred Shares.

• Sale price represents a significant premium to the RAL segment's implied valuation and book value.

• Transaction expected to result in an impairment on discontinued operations of $187 million as at June 30, 2024.

Synergies and expected cost savings

• Elimination of CAD 58 million ($58 million) in annual debt servicing costs and preferred share dividends.

• Annual debt and interest payments, plus preferred share dividends, reduced by CAD 280 million on a pro forma 2023 basis.

• Pro forma leverage improves from 3.6x to 1.8x net debt to Adjusted EBITDA.

• Free cash flow after debt repayments increases by approximately 29%.

• Adjusted EPS increases by 17% and return on equity rises by 36%.