SATS Ltd. (SATS) announced that it has finalised its funding plan for the proposed acquisition of Worldwide Flight Services (WFS).
The Singapore-based ground handling and catering provider said with a total acquisition cost of S$1.8 billion (US$1.33 billion), the proposed rights issue will not exceed S$800 million, with the balance amount to be funded primarily through a combination of term loans and internal cash resources.
"SATS is pleased to announce that the funding plan for the Total Acquisition Cost of S$1.8 billion will comprise a Euro-denominated Term Loan equivalent to approximately S$700 million and Proposed Rights Issue of up to approximately S$800 million, with the balance funded by internal cash," it said in a statement.
The proposed rights issue of up to S$800 million is expected to be launched in the first quarter of 2023 subject to conducive market conditions and the satisfaction or waiver of all of the regulatory approvals and shareholders’ approval of the planned acquisition.
"The details of the Proposed Rights Issue will be announced by the Company on the SGXNet at the appropriate time when the Company launches the Proposed Rights Issue on such terms and at such time as may be agreed with the underwriter(s). For the avoidance of doubt, the final decision regarding the Rights Issue will be made by SATS, at its discretion, at the appropriate time, taking into account the then-prevailing market conditions," SATS added.
The aviation services company said while the Rights Issue will only be undertaken if shareholders’ approval of the Proposed Acquisition is obtained, the Proposed Acquisition is "not conditional" upon the Rights Issue taking place, as SATS has also obtained an acquisition bridge facility for a Singapore dollar equivalent of up to €1,200 million (approximately equivalent to S$1,657 million) to fund and complete the Proposed Acquisition if required.
Finally, the remaining S$320 million will be drawn from SATS' existing cash balance.
SATS said the proposed WFS acquisition will create a "pre-eminent global air cargo handling platform" and SATS will gain leading positions in strategic hubs connecting key trade lanes across North America and Europe to complement its foothold in Asia Pacific.
Earlier reports said the deal will create the world's largest air cargo handler.
"The transaction will expand SATS' capabilities to meet growing demand from customers wanting to transport higher-value goods, including pharmaceutical products, vaccines and specialised cargo, on a global scale," SATS added.
The company added that the combined entity will be able to deliver greater earnings resilience and diversification across geographies and increase its access to the air cargo market.
"SATS will gain increased resilience against future economic cycles and disruptions, with greater earnings robustness supported by a global and diversified customer base," it added.
Going forward, SATS signalled confidence that it will be able to deleverage and meet its debt commitments with the potential free cash flows that will be generated from the combined businesses.