Swire in second attempt to take Haeco private

HONG KONG: Swire Pacific Ltd is making a second attempt to take maintenance unit Hong Kong Aircraft Engineering Co Ltd (Haeco) private, offering minority investors a 64% premium to its last closing price in a US$380mil deal.

Shares in Haeco, one of the world’s largest independent aircraft maintenance, repair and overhaul (MRO) providers shot 58% higher to HK$69.50, their highest level in nearly three years, but below the offer price of HK$72 per share.

Swire, also the biggest shareholder in Cathay Pacific, said in a statement that low levels of trade in Haeco’s shares and little need for equity fund-raising meant there was not much reason for it to remain listed.

Swire is seeking to buy the 25% of shares it does not already own, and the offer values the aircraft maintenance service firm at about HK$12bil (US$1.5bil).

The new offer price is, however, 31% lower than Swire’s first bid in 2010 and could meet with resistance from shareholders, said Corrine Png, CEO of Singapore-based research firm Crucial Perspective. She added that Haeco appeared to be on the mend following a HK$541mil loss in 2017 largely due to writedowns on its US business.

“There could be some investors who would want to hold out for a higher offer price from Swire Pacific,” she said. “Haeco still generated positive free cash flows of HK$326mil in 2017 and has favourable long-term earnings prospects.” Taking Haeco private would save administrative and listing-related costs, Swire said, noting the unit had not conducted any equity fund-raising in 30 years.

Haeco owns large MRO operations in Hong Kong, mainland China and the United States. Cathay, in which Swire Pacific owns 45%, is a major client in Hong Kong and shares some of the same directors.

The Haeco buyout plans come after Swire Pacific in February named Merlin Swire, a member of the controlling Swire family, as the company’s new chairman to succeed John Slosar from July 1.

Slosar, the current chairman of Swire Pacific, Haeco, Swire Properties Ltd and Cathay Pacific, will retain only the Cathay role from that date, with Merlin Swire taking on the three other roles. — Reuters