After rising in early trading, BBA Aviation (BBA) retreats 1.2% to 305.9p after confirming rumours that it is negotiating a US venture with Dubai Aerospace Enterprise (DAE). The Sunday Times reported on 25 August that the aircraft servicing specialist is weighing up 'a £2.7 billion tie-up' with a US competitor backed by the Dubai government.
Responding to the press speculation, BBA confirms it is in 'preliminary discussions with Dubai Aerospace Enterprise regarding a potential business combination with certain parts of DAE's business.'
While unnamed by BBA, media reports have identified the business in question as Arizona-based Standard Aero and any deal concluded could significantly ramp up BBA's exposure to the US where the group already derives up three quarters of its revenue.
The group cautioned nevertheless that there could be no assurance that the discussions with DAE would result in a transaction.
Standard has been valued by DAE at around £1.3 billion, marginally less than BBA's £1.4 billion market cap.
Despite a lack of significant share price action, market watchers seemed to like the proposed deal on paper: 'Any major transaction is likely to significantly enhance the market position of BBA’s Aftermarket Services and Systems activities, which currently generate the highest divisional margins for the group and comprises c. 43% of group profitability,' says Kevin Fogarty, an analyst at Westhouse.
In other developments, BBA reveals its Signature Flight Support business will buy the assets of Maguire Aviation Group, LLC at Van Nuys Airport, Los Angeles, California for a cash consideration of $69m on a cash and debt free basis.