Discovery Air Bails

[Outwest]

LONDON, Ont. (CP) - Discovery Air Inc. (TSX:DA.A) has bailed out of its previously announced plan to buy VIH Aviation Group Ltd., a helicopter company based in Victoria.

 

Discovery issued a brief statement late Wednesday saying that an interim agreement to buy VIH and its affiliate YYJ FBO Services Ltd., had been terminated. The company said earlier in the day that it wanted to lower the $167 million pricetag or scrap the proposed cash and share acquisition.

 

The London, Ont.-based Discovery said Wednesday it noted "material issues" after a due diligence review of the agreement announced in late January.

 

"To address these issues, Discovery Air hopes to revise certain material terms of the interim agreement governing the acquisition of VIH, including the purchase price," the company said.

 

VIH Aviation has a fleet of more than 60 helicopters.

 

Under the original deal, Discovery would have paid $50 million in cash and 65 million class A common shares, or about $117 million worth of stock at the current market price, as well as an option to buy two million Discovery class A shares at $2 each over 10 years.

 

LONDON, Ont. (CP) - Discovery Air Inc. (TSX:DA.A) has bailed out of its previously announced plan to buy VIH Aviation Group Ltd., a helicopter company based in Victoria.

 

Discovery issued a brief statement late Wednesday saying that an interim agreement to buy VIH and its affiliate YYJ FBO Services Ltd., had been terminated. The company said earlier in the day that it wanted to lower the $167 million pricetag or scrap the proposed cash and share acquisition.

 

The London, Ont.-based Discovery said Wednesday it noted "material issues" after a due diligence review of the agreement announced in late January.

 

"To address these issues, Discovery Air hopes to revise certain material terms of the interim agreement governing the acquisition of VIH, including the purchase price," the company said.

 

VIH Aviation has a fleet of more than 60 helicopters.

 

Under the original deal, Discovery would have paid $50 million in cash and 65 million class A common shares, or about $117 million worth of stock at the current market price, as well as an option to buy two million Discovery class A shares at $2 each over 10 years.

 

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VIH primarily operates a fleet of heavy and IMC capable helicopters in the coastal regions of Canada. In 2006, it had revenues of over $125 million and earnings of $10 million.

 

Discovery says it's strategic plan is to consolidate the fragmented Canadian niche aviation industry.

 

It also owns Great Slave Helicopters Ltd., which operates a fleet of 70 light and medium VFR helicopters and dominates the northern and central Canadian markets.

 

Discovery Air shares closed Wednesday at $1.80, down five cents or 2.7 per cent.

[Juliet Lima November]

Island helicopter takeover hits turbulence

Both companies say $167-million deal has been terminated

Darron Kloster, Times Colonist

Published: Thursday, March 08, 2007

 

The blockbuster aviation deal to merge Vancouver Island Helicopters with Discovery Air Inc. has been grounded.

 

Both sides announced late yesterday the proposed $167-million cash and share deal was terminated in the due-diligence process. The companies struck the proposal in late January and had expected to sign a formal agreement in May.

 

London, Ont.-based Discovery Air (TSX:DA.A) issued a statement earlier yesterday saying it wanted to either lower the price tag or scrap the deal for VIH after noting "material issues" in a review of the agreement.

 

A few hours later, the VIH Aviation Group formally terminated the interim agreement and both companies said the deal was off.

 

Ken Norie, chief executive and president of Victoria-based VIH Aviation Group, did not divulge details of how specifically the deal broke down. In an interview, Norie said "Price was not the issue," adding the "differences were in the vision of going forward."

 

The deal would have brought together two of Canada's largest helicopter companies and consolidated the fragmented Canadian niche aviation industry. Privately-held VIH Aviation, founded as Vancouver Island Helicopters in 1955, is one of Canada's largest helo companies with 60 aircraft, mostly heavy-lifters that work as aircranes in logging, oil and gas, and construction in Canada's coastal areas. Discovery operates Yellowknife-based Great Slave Helicopters, which dominates the charter market in Eastern and Northern Canada with 70 light and medium aircraft.

 

Discovery Air had agreed to pay $50 million in cash and 65 million class A common shares, or about $117 million worth of stock at the current market price, as well as an option to buy two million Discovery Class A shares at $2 each over 10 years.

 

No changes were planned at VIH, which operates five separate divisions, including a major helo repair centre, fuelling station and terminal at Victoria International Airport. The company, which had revenues of more than $125 million and earnings of $10 million last year, employs 280, about 100 of whom are based in Victoria. Norie would have remained CEO and become the largest shareholder of Discovery Air.

 

In an interview earlier this year, Norie viewed the merger as a "bigger pond to play in" and a way of gaining more access to capital to finance new machines and go after bigger contracts.

 

Norie said he has known the operators of Great Slave for years and there may be a silver lining to the crashed deal. He said there are hopes that the two companies can form a loose partnership involving aircraft, crews and various jobs.

 

Discovery president David Taylor, who is also president and CEO of Pacific & Western Credit Corp. (TSX: PWC), was not immediately available for comment.

 

Discovery Air shares were halted midway through yesterday's trading session, closing at $1.80, down five cents or 2.7 per cent.

[Juliet Lima November]

www.vih.com

VICTORIA, B.C. – MARCH 8, 2007

 

On March 7, 2007 the VIH Aviation Group (“VIH”) ended discussions with Discovery Air Inc. (“Discovery”) regarding a possible transaction between the two companies pursuant to an interim agreement signed by them in January 2007.

 

VIH viewed the interim agreement with Discovery as a strategic merger of companies, with VIH joining Great Slave Helicopters and Air Tindi. Discovery, a relatively new public company, lead by experienced financial and banking persons also promised to VIH its expertise in and access to financial and public markets. As such, VIH also viewed the merger as a means to assist in the funding of VIH’s business growth over the years to come.

 

After the signing of the letter of intent, VIH entered discussions regarding the details and the due diligence of the proposed merger. VIH provided Discovery with internal financial statements and budgets, which confirmed in detail the financial basis of the letter of intent and the projections given by VIH to Discovery in the letter of intent. VIH requested Discovery’s current financial information as VIH began its due diligence on Discovery, but Discovery resisted providing such information and as of March 7, 2007 this information still had not been provided to VIH. As VIH waited on the Discovery information it began discussions with Discovery regarding the details of the merger and each company’s respective visions for the management and future growth of the business.

 

Over the course of recent conversations between VIH and David Taylor, CEO of Discovery, it became apparent that both businesses have a different vision of the strategic direction of the companies and their corporate management and governance in both the short term and long term. VIH has not divulged details of how specifically the negotiations broke down, but price was not the issue.

 

Unfortunately, Discovery issued a unilateral statement on March 7, 2007 without the consent of VIH regarding Discovery’s perception of the status of the transaction. VIH believes that the Discovery statement regarding material differences was misleading and inaccurate. Based on Discovery’s unauthorized press release and the growing differences between VIH and Discovery’s vision for the future, VIH decided to terminate the letter of intent with Discovery Air Inc. on March 7, 2007.

 

VIH continues to have great respect for Great Slave Helicopters and Air Tindi. In the future, VIH will look forward to continuing a relationship with both companies as VIH expands its IFR offshore and heavy lift business in the American and Canadian Arctic regions. VIH wishes Great Slave and Air Tindi well in their future endeavors.

 

VIH is excited about its healthy charter business from coast to coast in Canada, its operations in several international markets, its ongoing new helicopter technology program (Sikorsky S92, Sikorsky S76D, and Bell 407 helicopters) and its growing repair, overhaul and manufacturing business. Additionally, VIH is pleased to announce that discussions for a joint venture in China with a major aviation group, as well as VIH sister company’s application for an extended Part 135 operating certificate in the USA for heavy lift transport operation, are expected to receive final approval this spring. Once these initiatives are completed, VIH, in addition to its existing Canadian operations, will be strategically positioned in the worlds largest helicopter market (the Gulf of Mexico) and the worlds largest emerging market (China).

 

The VIH Aviation Group has been in business for over 50 years and is comprised of VIH Helicopters Inc., Cougar Helicopters Inc., VIH Aerospace Inc., and Western Airways Inc. The VIH Group operates a diverse fleet of helicopters consisting of 14 types including Sikorsky, Kamov, Eurocopter and Bell helicopters, and is an approved service centre for most major manufacturers. The VIH Group provides helicopter charters to various markets including: forestry, oil and gas exploration, air ambulance services, offshore oil and gas personnel transport, mining exploration, aerial construction and tourism sectors. VIH operates from several facilities across Canada and the USA with its head offices located at the Victoria International Airport in British Columbia, Canada.

 

VIH has been leading the way in helicopter services for over 50 years and is looking forward to another 50 years of leadership.