Sats to buy world's largest air cargo handler WFS for $1.64 billion

The deal will be financed with a S$1.7 billion equity fund raising, with the balance coming from internal cash resources. PHOTO: JOYCE FANG

SINGAPORE - Sats has agreed to buy the world’s largest air cargo handler Worldwide Flight Services (WFS) at an enterprise value of €2.25 billion (S$3.1 billion), a move which will elevate the Singapore-listed firm to be a leader in aviation services.

The in-flight caterer and ground handler will pay about $1.64 billion in cash for the Paris-based company, it said in an exchange filing on Wednesday, after calling for a trading halt earlier in the morning.

Sats plans to fund the deal through a $1.7 billion equity fund-raising, with the rest drawn from internal cash resources. It confirmed last week that it was in ongoing discussions with Cerberus Capital Management to acquire the air cargo handler after Bloomberg News reported that it was in talks for a potential deal.

The proposed acquisition will position Sats as the largest cargo handler globally, managing more than 9 million tonnes of cargo, it said. 

The combined network of the two entities will cover trade routes comprising more than 50 per cent of global air cargo volume, with strategic hubs in Asia, Europe and the United States, as well as in new growth markets including Latin America and Africa.

Founded in 1984, WFS operates in five of the top 10 cargo airports in North America and Europe, the Middle East and Africa, including Los Angeles, Chicago, Miami, Frankfurt and Paris.

Meanwhile, Sats is already present in four of the top 10 cargo airports in Asia, including Hong Kong, Taipei, Singapore and Beijing.

Sats’ customers want seamless support across regions, in a way that simplifies and strengthens their own operations, said Mr Kerry Mok, president and chief executive of Sats.

“Combining with WFS will let us meet those needs through new cargo handling solutions and capabilities, enhanced service quality, greater digitalisation and better visibility and traceability across the whole supply chain,” said Mr Mok.

The global cargo handling market has proven resilient, driven by e-commerce growth and the demand for specialised services such as in pharmaceuticals. 

Sats noted  that the combined business proposition will allow it to take advantage of the current structural growth trend where major e-commerce players are increasingly partnering cargo handlers and customers are expecting service providers to offer solutions to manage their complex supply chains and provide frictionless connectivity.

The deal is expected to be “immediately financially accretive” for Sats, raising its earnings per share by 78 per cent – from 1.8 cents to 3.2 cents – and  increasing its revenue by more than 200 per cent on a pro forma basis for the 12 months ended March 31. 

It is also expected to bump up its earnings before interest, tax, depreciation and amortisation from $94 million to $445 million on a pro forma basis for the same period ended March 31.

The proposed acquisition has to be put to shareholders’ vote in an extraordinary general meeting that is slated to be held by early 2023. 

Temasek, which owns about 39.7 per cent of Sats, has provided an irrevocable undertaking to vote in favour of the transaction.

The deal is expected to close by March 2023.

About Worldwide Flight Services

Founded in 1984, Worldwide Flight Services is the world’s largest air cargo logistics provider and one of the leading providers of ground handling and technical services.

Its 32,300 employees serve more than 300 customers at 164 major airports in 18 countries on five continents, which include key strategic hubs in Europe and North America.

The company has a diversified customer base, including the largest airlines, logistics and e-commerce players in the world.

Based on financial statements for the 12 months ended March 31, it has a book value of about €261 million (S$361 million), with net tangible assets of negative €829 million.

The earnings before interest, taxes, depreciation and amortisation, or Ebitda, attributable to the company is about €232 million, and its net profit before tax and non-controlling interests is €66 million.

It is backed by American private equity firm Cerberus Capital Management, which bought the French firm in 2018 for about €1.2 billion.

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