Canadian aviation training company CAE has agreed to acquire Bombardier's Business Aircraft Training (BAT) business for an enterprise value of US$645 million. The company is expanding its ability to address the training market for customers operating Bombardier business jets, which at more than 4,800 aircraft is one of the largest and most valuable in-service fleets of business aircraft in the world.

The acquisition will serve to expand CAE's position in the largest and fastest growing segment of the business aviation training market, that of medium and large cabin business jets. It also provides CAE with talented people, a portfolio of customers and an established recurring training business that is highly complementary to its network. The BAT business includes a modern fleet of full-flight simulators (FFS) and training devices covering the Learjet, Challenger and Global product lines, including the latest large cabin Global 5500, 6500 and 7500 business jets.

In its first full year following the closing of the transaction, the acquisition will provide CAE with high single-digit percentage earnings accretion and will be accretive to free cash flow. It is also expected to be accretive to CAE's civil segment operating income margin by approximately 100-150 basis points. The acquisition enterprise value of Bombardier's BAT business represents a multiple of approximately nine times one-year Forward EBITDA. The EBITDA is expected to grow at a double-digit pace; driven by demand from the existing large installed base of Bombardier business jet operators and the ramp up of recent and already planned FFS deployments. The acquisition is subject to regulatory approvals and is expected to close by the second half of 2019.

Alongside this, CAE has agreed to pay US$155 million to monetise its existing future royalty obligations under the current authorised training provider (ATP) agreement with Bombardier. This also involves the extension of CAE's ATP agreement to 2038. The monetisation represents the discounted sum of royalties payable by CAE over the next 20 years and the transaction is expected to close by the end of CAE's current fiscal year.

“CAE is the largest independent civil aviation training company in the world and we are proud to support the many business aircraft operators, airlines and aircraft manufacturers who rely on it as their partner of choice for the most comprehensive and innovative training solutions,” says CAE president and CEO Marc Parent. “This transaction represents a win-win for both companies resulting in enhanced core focus. We look forward to having increased addressability in the large market of Bombardier business jet operators and to providing customers with a world-class training experience. Market fundamentals in business aviation are strong and the business we are acquiring is well-supported by a large installed base. We are expanding our position in the largest and fastest growing segment of business aviation training at an opportune time.”

The BAT business will be integrated smoothly as its operations are already co-located within CAE's Dallas and Montreal training centres, after which time Bombardier business jet operators will have even broader access to training at the seven CAE business aviation training locations worldwide.

With this agreement, CAE will add 12 Bombardier business aviation full-flight simulators to its training network (including one deployment already planned for CAE's fiscal year 2021), to give a total of 29 available worldwide with further growth planned in the near to mid-term. CAE operates more than 80 business aviation FFSs in its training network.