China-based RIFA launches takeover bid for Airwork

China-based Zhejiang RIFA Holding Group Co. Limited (RIFA) has made a takeover bid to acquire a stake of at least 50.01%, and up to 75%, in New Zealand-based Airwork Holdings, according to takeover notice issued by the New Zealand Stock Exchange. With an offer price of $5.40 per share, the deal would be valued at approximately US $146 million.

But who is RIFA, and why do they want Airwork?

Attempts by Chinese companies to acquire assets overseas have been a frequent occurrence in the airfreight and logistics industries this year, although with mixed results. After a series of successful acquisitions, the Hainan-based HNA Group for example, has enhanced its reputation as a well-managed privately-held company capable of performing its due-diligence prior to bidding on companies like Swissport Group. Other companies like Shanghai Yiqian Trading, which was the suitor involved in the failed sale of Frankfurt’s Hahn Airport, have made people skeptical of such deals.

Although RIFA maintains a low-profile, both in China and abroad, the holding company has a history of successful overseas acquisitions, particularly in Oceania. From its headquarters in Hangzhou, RIFA’s core business has traditionally been related to the production of high-end textile machinery and precision electronic machinery. More recently RIFA has taken an interest in sectors like livestock and aviation. In 2014, RIFA launched Air Xiya, which it refers to as a “general aviation business.”

Under new directives in the Communist Party’s current five-year plan, the Civil Aviation Authority of China is easing restrictions on low-level airspace, ceding space that was once almost exclusively the domain of military aircraft to low-flying aircraft and helicopters. This is likely to drive growth in general aviation, and companies like Air Xiya will be able to expand the scope and scale of their operations.

With a fleet of helicopters, Air Xiya is engaged in a variety of flying – ranging from agriculture and forestry, air tours, to executive charter services. Which leads us back to the proposed takeover of Airwork which, among other things, has a helicopter business that is of great interest to RIFA.

As a shareholder in Airwork, RIFA expects new opportunities to arise from:

• “growing Airwork’s helicopter leasing presence in China through a potential dispatch of existing Airwork helicopters and acquisition of new helicopters, and
• developing Airwork’s leading aviation maintenance, repair and overhaul (MRO) capability and reputation to expand its certification in emerging markets, including Asia and Latin America”

As for the future of Airwork’s other business segments? RIFA says it would “maintain open lines of communication” to “enhance commercial opportunities and improve the working relationship” between the two companies, while leaving most of Airwork’s business as-is. As part of the proposal, the office of the CEO and company headquarters would remain in New Zealand, and efforts would be made to retain key personnel.

Moving forward, Airwork is expected to issue a takeover notice this Friday, and has urged shareholders to take no action until it provides further guidance. The takeover will be subject approval from financiers in New Zealand, the Chinese government, and Overseas Investment Office.

Net profit at Airwork rose 58% year-over-year, to US $17.6 million for its 2016 financial calendar which ended in June. The company breaks down the performance of its helicopter and fixed-wing units, both of which performed well last year. As of 30 June 2016, Airwork had a fleet which included 44 helicopters and 24 fixed wing aircraft, of which 18 are freighters (including ten 737-300Fs/-400Fs which it operates for the Toll Group and for New Zealand-based Freightways),