What is behind the soaring interest in Signature Aviation? | Business News


For much of last year, it felt as if a rash of takeover bids for UK companies was looming, due to both the weakness in the pound and the UK stock market’s depressed valuation relative to its peers.

Sure enough, towards the end of 2020, that came to pass, with overseas buyers emerging for companies as diverse as the gaming firm William Hill, the insurer RSA, and the retirement homebuilder McCarthy & Stone.

Already, 2021 has continued in a similar vein with an £8.1bn takeover approach from US casino giant MGM for Entain, the owner of Ladbrokes and Coral.

And on Monday, a takeover battle that got under way just before Christmas appeared to be concluded when Signature Aviation, the aviation services group, agreed to a £3.43bn takeover bid from Global Infrastructure Partners (GIP), the New York-based investment fund best known in this country for buying Gatwick Airport in 2009.

GIP has outbid a rival consortium led by Blackstone, the private equity giant, which had joined forces with Cascade, the investment firm that manages Microsoft founder Bill Gates’s fortune, which is currently Signature’s biggest shareholder with a 17% stake. Sky’s City editor, Mark Kleinman, revealed last week that another private equity firm, Carlyle Group, was also considering making an offer.

The offer has been recommended to shareholders by the Signature board, chaired by the veteran industrialist Sir Nigel Rudd, but this may not be the end of the matter.

Shares of Signature, which are valued at 405p under the takeover, were trading as high as 445p at one point today – indicating that investors think a counter-bid is coming.

Sir Nigel has presided over the previous takeover of three leading British companies – Boots, the engineer Invensys and the glass-maker Pilkington – and is a past master at getting a competitive auction going.

A deserted North Terminal at Gatwick Airport
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Global Infrastructure Partners is best known in the UK for buying Gatwick Airport in 2009

He said today: “We believe that the offer from GIP represents an attractive and certain value in cash today for Signature shareholders, reflecting the high quality of the business and its network, its people and its future prospects.

“The Signature directors believe that the proposal provides clear benefits to Signature shareholders and GIP’s operational and financial resources will generate enhanced opportunities for our employees, and ensure continued high-quality, full-service flight support for business and general aviation travel.”

A key question investors will be asking, though, is what both Blackstone and GIP have spotted in Signature’s prospects to be prepared to offer such sums. Blackstone’s opening salvo, just before Christmas, was pitched at 381p-a-share and, at the time, that represented a 40% premium to Signature’s share price before news of its interest became public, not to mention being around a fifth more than the shares were in January last year, before COVID-19 hammered the global aviation sector.

But COVID-19 may also help explain the interest. Signature is the world’s leading provider of ground handling, passenger and pilot amenities, technical support, hangar rental and fuelling at 370 locations around the world, including Heathrow, Luton Airport and Biggin Hill in the UK.

In particular, it has built a strong reputation providing refuelling and maintenance services to operators of private jets, a sector that has flourished during the lockdowns. Its biggest single customer is NetJets, the private jet operator owned by Berkshire Hathaway, the vehicle of investment billionaire Warren Buffett.

That expertise means Signature is well known by a number of wealthy individuals and to those working in the top echelons of private equity, especially in the United States, from where it derives 90% of its revenues.

Mr Gates, who has described private jets as his one guilty pleasure in life, first bought shares in the business in 2009 and topped up his investment twice last year as the share price fell on COVID concerns.

While Signature is now a services company, older stock market hands will remember it more as a stalwart of manufacturing, when it traded under the name BBA.

Bill Gates, Co-Chair of Bill & Melinda Gates Foundation, attends a conversation at the 2019 New Economy Forum in Beijing, China November 21, 2019
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Bill Gates has described private jets as his one guilty pleasure in life

The company traces its origins back to 1879 when William Fenton, a Scottish-born cotton mill manager working in Sweden, invented a new form of power transmission belting.

He joined forces with a London merchant, Walter Wilson-Cobbett, to open a site in Dundee under the name William Fenton & Co.

It later changed its name to W Wilson-Cobbett and, later still, to Scandinavia Belting. In 1925, after buying British Asbestos, the name was changed again to British Belting and Asbestos.

Among customers in its early years were Ford, to whom it supplied transmission linings for the Model T, while other car-makers it supplied in the early years of the 20th century included Morris, Austin and Vauxhall in the UK and Renault and Bugatti in France.

It also supplied parts for fighter aircraft including the Spitfire, the Hurricane and the Typhoon. Throughout this entire period, it retained a link to its founders, with Charles Fenton – great-grandson of William Fenton – only stepping down as a director of the company in 1991.

During the decade prior to that, it had become the world’s biggest supplier of brake pads to the motor industry, but, by the time Mr Fenton left the company, it was beginning to move into aviation services.

In April 1986 it had acquired a business called Guthrie Corporation, whose assets included Page Avjet, an executive aircraft interiors business. This was merged in 1992 with Butler, a provider of fixed base and airline service operations, with the combined operation later being rechristened Signature Flight Support.

In 2006, when Sir Nigel was interim chief executive, BBA was demerged into BBA Aviation and a materials business called Fiberweb. The latter company was taken over in 2013 for £182.5m by the US company Polymer Group.

Other acquisitions and disposals have followed during the last decade, one of which, a provider of specialist business and general aviation support services called Landmark Aviation, was ironically bought from Carlyle for more than $2bn in 2016, giving the company the largest network of fuelling stops in the US. The entire business was renamed Signature Aviation in 2019.

Now it too appears to be going the same way as Fiberweb – but who ends up as ultimate owner of this business still looks open to debate.



Sky News