Exchange Income Corporation to Acquire Regional One, Inc. for US $80 million

WINNIPEG, Feb. 28, 2013 /CNW/ – Exchange Income Corporation (TSX: EIF) (the “Corporation”), announced today that it has signed a stock purchase agreement to acquire all of the shares of Regional One, Inc., a privately-owned US company that is a leading provider of aircraft and engine aftermarket parts to regional airline operators around the world. The acquisition is valued at approximately US $80 million, subject to adjustments for taxes, and will be funded through the issuance of the Corporation’s common shares and debt financing. The acquisition is expected to be immediately accretive to the Corporation’s earnings per share and free cash flow per share. The closing of the transaction is subject to receipt of regulatory approvals and other standard conditions. The transaction is expected to close by April 1, 2013.

“The acquisition of Regional One will provide product and geographical diversification of revenue and cash flow within our aviation segment and is strategic on a number of levels,” said Mr. Mike Pyle, President and CEO of Exchange Income Corporation. “Most notably, it provides a proxy for vertical integration into one of the major expense categories of our aviation segment. Equally important, it can generate offsetting cash flow to mitigate price increases in aircraft and parts. We look forward to welcoming Regional One into our operations.”

Doron Marom, the founder of Regional One stated, “I am very proud of the significant growth and development of Regional One since its inception in 2004. The quality of our people and operations has enabled Regional One to become a leader in the regional aircraft and engine aftermarket parts industry and we see the sale to Exchange Income Corporation as the natural progression to further growth. The Corporation’s track record with their other companies was a key driver in our decision to sell. It is a rare combination to find a buyer that has the access to capital that Exchange Income Corporation brings yet still enables us to keep our core culture and values that have driven Regional One to its current level of success. I’m looking forward to continuing to be the CEO and oversee Regional One in its next chapter.”

Acquisition Highlights

The purchase price is approximately US $80 million, subject to adjustments for taxes, which is based on an EBITDA multiple that is within the range of prior acquisitions by the Corporation.
25% of the purchase price will be paid through the issuance of Exchange Income Corporation common shares; the balance will be financed using the Corporation’s senior credit facility. This transaction contains earn out provisions which are contingent on Regional One achieving certain performance milestones in order for the maximum purchase price to be paid.
Regional One was founded in 2004 and has three main revenue streams being (i) direct sales of parts, aircraft, engines and other related equipment to regional airlines; (ii) consignment sales of customers’ surplus parts inventory; and (iii) leasing of aircraft, engines and equipment to regional airlines.
Regional One operates out of a 60,000 square foot office and warehouse facility in Miami, Florida.
Regional One has customers worldwide.
Over the last 5 years Regional One has had annual average growth of 25%.
In 2011, Regional One generated US $31.6 million in revenue.

“Consistent with our traditional acquisition criteria, Regional One was identified because it operates in defensible markets with attractive margins,” said Mr. Adam Terwin, Chief Financial Officer of Exchange Income Corporation. “We expect that the transaction will be immediately accretive to our key financial metrics, including EBITDA, cash flows, earnings per share and free cash flow. To sustain this performance, we have retained key members of Regional One management through long-term employment contracts.”