Hastings Equity Flies High With Airplane Accessory Co.25-Nov-2008
Dow Jones LBO Wire- Beina Xu
11/25/2008 – The corporate jet sector has shown some signs of trouble like many other industries in this fast-settling recession, but Hastings Equity Partners has enough hope in the sector to put its money on wings.
The firm led an investment in aircraft parts supplier Quality Aircraft Accessories Inc. in hopes of expanding into the turbine engine segment, which includes most corporate and business jets.
"These jet manufacturers have backlogs going for years," said Managing Director Bruce MacRae. "For now, people have put money down and are still buying these planes."
The deal was worth less than $15 million and the firm took more than a 65% interest in the company, investing alongside minority interest holders Brett Benton and Michael Lipscomb, according to MacRae. The transaction closed on Sept. 30.
Benton, a former executive at aviation parts and services company Nordam Group, was looking to take an equity ownership in a deal, and was introduced to the firm by advisory firm Acquisition Advisors LLC, said MacRae. He'll serve as the company's chief executive. Lipscomb, former president, chairman and chief executive of Argo-Tech Corp. and an investor in Hastings Equity Fund II LP, will be on the board.
Founder Justin Hicks retained a minority interest, and will remain actively involved in the company, according to MacRae. The firm split the deal between equity and debt.
Tulsa, Okla.-based QAA was founded in 1999 by Hicks, and repairs and refurbishes aircraft engine components like generators, fuel and hydraulic pumps and turbo chargers; the other half of its business is selling new original equipment manufacturer parts.
Its customers are mainly mechanics of flight-based operations ï¿½ the "gas stations for planes" ï¿½ and engine overhaul shops, which replace accessory parts for planes, according to MacRae. The company, which has around 25 employees, also serves flight schools and has 20% of its business in Asia and Europe, he added.
One attractive element of the investment is the consistent need of airplane and parts refurbishment. "A lot of parts lend themselves to being rebuilt," said MacRae. "You can rebuild them and they'll operate like new - airplanes have 20, 30 year lives."
Earlier this month, the General Aviation Manufacturers Association said third quarter aircraft deliveries and billings declined from the second quarter. The association noted that turbine-powered aircraft did well in the third quarter.
Hastings Equity Fund II LP has raised $60 million, LBO Wire previously reported; the firm's funds consist of "almost exclusively all" individual investors who often take co-investor roles, or become advisers and board members, said MacRae. The fund had a preliminary close in April, but is "probably going to call it quits" for fund-raising until markets settle down, he added.
Hastings is looking at a couple deals, but "it's a really squirrelly time to close on anything," said MacRae, who doesn't predict any deals to go through until 2009.
Reach Hastings Equity at 781-209-8801.