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Macquarie (MIC) to Divest Atlantic Aviation to KKR, Shares Rise

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Macquarie Infrastructure Corporation (MIC - Free Report) yesterday announced that it agreed to divest its Atlantic Aviation segment in a transaction worth $4.475 billion. The other party to the transaction is New York-based KKR & Co. Inc.

Notably, Macquarie’s shares gained 10.9% yesterday, ending the trading session at $38.83.

KKR engages in providing insurance and capital-related solutions as well as those related to alternative asset management. Funds sponsored by KKR primarily invest in real assets and private equity, among others. Its insurance subsidiaries provide reinsurance, retirement and life products.

Inside the Headlines

Macquarie’s Atlantic Aviation segment offers aircraft hangaring, fuel, terminal and other services primarily to owners and operators of general aviation jet aircraft at 69 airports throughout the United States. It also caters to freight, commercial, government and military aviation customers.

The segment generated $209.6 million in revenues in first-quarter 2021, reflecting a year-over-year decline of 6.4% from the year-ago quarter. The segment’s sales accounted for 79.3% of the company’s total revenues in the first quarter.

As noted, the purchase price of $4.475 billion comprises cash, assumed debts and obligations related to reorganization. It represents 16.2X of Atlantic Aviation’s earnings before interest, taxes and depreciation of 2019. Upon the completion of the transaction, Macquarie is expected to get $3.525 billion as proceeds or $3.298 billion as net proceeds (after the payment of $227 million to the external manager).

Notably, the above-mentioned payment to Macquarie’s external manager will be made by Macquarie Infrastructure Holdings LLC. On May 6, Macquarie received its shareholder approval to reorganize the company into a listed limited liability company. The reorganization will be accomplished before the completion of the Atlantic Aviation divestment.

The completion of the transaction is subject to the receipt of regulatory clearances along with the approvals from Macquarie shareholders. It is expected to be completed in fourth-quarter 2021.

Disposing of businesses is an effective way for the company to unlock values for shareholders. Notably, Macquarie divested its liquid storage and handling business, International-Matex Tank Terminals, in December 2020. The other party to the transaction was an affiliate of Riverstone. Also, worth mentioning here is that Macquarie will divest its MIC Hawaii segment in 2022.

Zacks Rank, Price Performance and Estimate Trend

With a market capitalization of $3.1 billion, the company currently carries a Zacks Rank #2 (Buy). A solid pipeline of projects, cost-control measures and investments in growth opportunities are likely to aid the company in the quarters ahead.

In the past three months, the company’s stock has gained 27.4% compared with the industry’s growth of 9%.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

The Zacks Consensus Estimate for Macquarie’s earnings is pegged at $2.12 for 2021 and $2.58 for 2022, reflecting growth of 18.4% and 5.7% from the 60-day-ago figures. Also, the consensus estimate for second-quarter 2021 earnings of 44 cents per share reflects growth of 25.7% from the 60-day-ago figure.

Macquarie Infrastructure Company Price and Consensus

 

Macquarie Infrastructure Company Price and Consensus

Macquarie Infrastructure Company price-consensus-chart | Macquarie Infrastructure Company Quote

Other Stocks to Consider

Three other top-ranked stocks in the industry are Griffon Corporation (GFF - Free Report) , Crane Co. (CR - Free Report) and ITT Inc. (ITT - Free Report) . While Griffon presently sports a Zacks Rank #1 (Strong Buy), both Crane and ITT carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for the companies have improved for the current year. Also, earnings surprise for the last reported quarter was 50.00% for Griffon, 26.72% for Crane and 21.84% for ITT.

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