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US private equity firm, Global Infrastructure Partners (GIP), has taken the lead in the race to acquire FTSE 250 company Signature Aviation (SA). The companies on 11 January that they have reached agreement as to the terms of a recommended cash offer for the entire issued and to be issued share capital of SA, valuing the private jet service company at £3.4 bn. The offer represents a 51% premium as to SA’s share price on 16 December 2020, being the last business day prior to the offer period.

News of the offer comes just days after private equity group, Carlyle Investment Management expressed its interest in acquiring SA.  SA the approach on 7 January, however stated that no proposal has been received. Carlyle represents the latest of the potential bidders for the FTSE 250 company, with GIP and Blackstone both for SA back in December. The competing bids have caused SA’s shares to soar above pre-pandemic levels, closing over 40% higher on 17 December, being the date of the GIP/Blackstone announcement. Since then, the share price has risen a further 16%.

The aviation sector has been hard hit by the pandemic, given the significant travel restrictions. SA has not been immune to the turbulence, losing more half of its share price value at the peak of the pandemic in March. However, since then, SA that flight activity has stabilised at around 80% of 2019 levels and that the company is expecting improved financial performance for the second half of 2020. Furthermore, SA for the half year to 31 January 2021, after previously suspending dividend payments in order to preserve cash. Nigel Rudd, Chair of SA, highlighted this when commenting on the acquisition, stating: ‘The resilient performance and strong financial position through the pandemic has enabled the Signature Directors to consider its future and evaluate this offer from a position of strength.’

Prior to the announcement, SA indicated that it ‘would be minded to recommend a firm offer’ by Blackstone which would value SA at approximately £3.15 bn, and had rejected GIP’s initial proposal which was lower in value. Blackstone highlighted SA’s support in its latest on 8 January 2021, where the investment management firm announced it now intends to make a joint offer for SA with Bill Gate’s Cascade Investment, at the previously stated offer price.

Cascade have entered into an exclusivity agreement with Blackstone, stating that it would not work with any other company on a takeover bid for SA. Furthermore, under the terms of a customary bid conduct agreement with Blackstone, Cascade agreed it ‘will vote against any competing offer’, should the consortium go ahead with a firm offer. GIP is structuring its takeover of SA by way of a court-sanctioned scheme of arrangement under part 26 of the Companies Act 2006.  To be approved, the scheme would require approval of at least 75% of shareholders. Therefore, Cascade’s voting arrangements, in respect of its 19% holding, could become an obstacle in GIP’s bid for SA.

The Blackstone/ Cascade consortium has until 14 January to confirm whether it will be making an offer for SA, and Carlyle has until 4 February 2021.

SA is one of numerous companies attracting the attention of multiple suitors, with six firm offers in 2020 taking place against the backdrop of actual or potential competing bids. For more on this and other trends in 2020, look out for Market Tracker’s full year Public M&A trend report, to be published this month.