Midcap aviation services firm BBA Aviation (BBA) is planning to merge its charter business with Gama Aviation’s (GMAA: AIM) US aircraft management division.
Shares in Gama are flying 11.7% higher, while BBA remains broadly flat at 285.7p.
The combined entity, called Gama Aviation Signature Aircraft Management, will become one of the world’s largest charter businesses with approximately 200 aeroplanes under management.
BBA says the new business will be supported by the Signature Flight Support global fixed base operator network and fixed and mobile line maintenance.
The company has also completed the acquisition of part of GE Aviation's avionics business for $61.5m.
Investment bank Cantor Fitzgerald analyst Robin Byde currently has Gama Aviation on a ‘hold’ recommendation but he is optimistic about the joint venture. The analyst believes the deal will create a market leading platform to provide maintenance and aircraft management services in the biggest business aviation market globally.
Short-term weakness in European markets remain a risk, as far as Byde is concerned, plus the analyst points out acquisition integration, joint venture formation and currency translation as other elements to watch closely.
Gama expects to cut at least $2m from operational costs, although overall the deal is likely to be earnings neutral over the next two years.
