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the aviation industry is enjoying a recovery.

if the plummeting air ticket prices during the national day holiday are still frustrating aviation people, then from a recent ipo, we may be able to see the dawn of recovery.

recently, aircraft mro supplier standardaero launched its ipo plan. jpmorgan chase and morgan stanley are among the underwriters of this ipo. the company plans to list on the new york stock exchange under the ticker symbol "saro."

information shows that the company initially proposed to issue 46.5 million shares and now plans to issue an additional 60 million shares at a price per share of between $20 and $23. as a result, standardaero's fundraising scale increased from the initial us$1.1 billion to us$1.38 billion, and its valuation also rose to us$7.7 billion, making it one of the most highly valued targets in recent us stock ipos.

who is standardaero?

according to records, the development history of standardaero can be traced back to 1911, when charles pearce and william bickell founded standard machine works in winnipeg, manitoba, canada. initially, the company repaired, overhauled and rebuilt automobile, truck and tractor engines.

as civil aviation began to grow in the region in the 1920s, the need for reliable engine service increased, and standard machine works began adding aircraft engines to its list of capabilities, rebuilding its first aircraft engine, the armstrong sidley cheetah piston engine.

in 1949, the company changed its name to standard aero engine limited (sae) and, over time, added more facilities and capabilities, continuing to hone its expertise in civil and military aircraft engines. in 1960, sae began overhauling turbine engines and invested heavily in tooling and training.

over the next six decades, through a series of strategic acquisitions, new project wins and significant expansion of services and customers, standardaero has now become the world's largest independent provider of maintenance, repair and overhaul (mro) services, according to the prospectus. it operates more than 50 plants employing approximately 7,300 people and has additional regional service and support centers around the world.

it consists of two unique divisions: engine services and component repair services, which represent standardaero's core strengths, including comprehensive engine maintenance, repair and overhaul service capabilities, as well as services for business aviation, commercial aviation, military, fixed a portfolio of critical component repair services for wing, helicopter and industrial power customers.

at the same time, standardaero has more than 5,000 customers around the world and has established partnerships with major aerospace engine manufacturers such as rolls-royce, ge aviation and pratt & whitney, providing aircraft and rotorcraft engines, auxiliary power units (apus) ), mro services for components; airframe services.

although standardaero has an irreplaceable position in the aviation industry, its financial situation is still not optimistic.in 2023, standardaero's revenue was us$4.5633 billion, compared with us$4.1505 billion in the same period in 2022, a year-on-year increase of 10.0%. correspondingly, losses also expanded year-on-year. standardaero's net loss in 2023 was us$35.1 million, compared with 2022 in 2017, the loss increased by 67.1% to us$21 million.

in the first half of 2024, as the aviation industry begins to show signs of recovery,standardaero's revenue also improved, with revenue reaching us$2.5829 billion, a year-on-year increase of 12%. at the same time, it achieved a turnaround, with a net profit of us$8.6 million.

the prospectus shows that its history of net losses is mainly due to standard aero's historical huge debt as a private company. as of june 30, 2024, the total debt reached us$3.2757 billion. judging from the main purpose of its ipo fundraising, it is also to repay these huge debts and interest.

carlyle and singapore sovereign funds hold the largest shares

unlike most companies, standardaero did not raise capital before its ipo, and its only transaction in the primary market was its acquisition by carlyle in 2019.

in 2019, carlyle group acquired standardaero from veritas capital for approximately us$5 billion and is now standardaero's largest shareholder. before the ipo, carlyle's shareholding ratio was 79.5%. during the ipo process, carlyle planned to sell 569 ten thousand shares can be cashed out up to us$130 million, and the shareholding ratio will be reduced to 68.2% after the ipo.

its second largest shareholder is the singapore sovereign fund (gic), which held 17.9% of the shares before the ipo. during the ipo process, gic plans to sell 1.2845 million shares, which can cash out up to us$29.54 million. after the ipo, the shareholding ratio will be reduced to 15.4%.

in addition to the above two major shareholders, standardaero ceo russell ford also held a 1.1% stake before the ipo.

it is reported that ford was appointed ceo of standard aero in october 2013 and has been in charge of standard aero for more than ten years. he has more than 30 years of experience in the aerospace industry. prior to joining standardaero, he served as president of precision carlton forge works and dickson test group.

according to the prospectus, cornerstone investors blackrock, janus henderson and norges bank plan to purchase shares worth us$275 million in the ipo, accounting for 27.5% of the transaction.

it is worth mentioning that although standardaero has little financing record, it has made many mergers and acquisitions. in the past seven years, standardaero has completed 11 strategic acquisitions.

having a proven strategy within standardaero to integrate new acquisitions and achieve significant synergies enhances its competitiveness.

unlike other sectors, the market in which standardaero operates is highly fragmented. this environment provides it with ample acquisition opportunities to develop and enhance its capabilities to achieve compound returns.

the most recent acquisition occurred at the end of august this year, when standardaero acquired aero turbine, a supplier of engine parts repair and other value-added engine aftermarket services to customers, for approximately $120 million. in 2023, aero turbine generated $70.1 million in revenue and $14.3 million in net income.

another large acquisition was three years ago, when standardaero completed the acquisition of signature aviation's engine repair and overhaul business for a total price of us$226.2 million. the acquisition significantly expands standardaero's capabilities and capabilities in providing engine aftermarket services for general aviation, regional and helicopter engines.

from prostitution to ipo

in fact, ipo was not standardaero’s first choice before. in april and july this year, there were rumors that standardaero would sell itself.

in april, reports surfaced that the carlyle group had hired jpmorgan chase and morgan stanley to evaluate standardaero's options of a sale or an ipo, which at the time valued standardaero at more than $10 billion.

this is because the after-sales service industry is heating up.

around 9,000 maintenance and engine overhauls are expected to be carried out in 2024 as the aviation industry prepares for an era of extended asset life. in addition, most maintenance deferred during the epidemic is about to expire and can no longer be postponed, supporting further growth in the aftermarket. with the coming wave of repairs, demand for engine aftermarket services is also expected to increase significantly,

in addition to the huge market space, this business is also one of the few industries that can generate huge profits with relatively small capital investment. at the same time, since the service life of an aircraft engine is about thirty or forty years, it can become a long-term source of income.

so while some aircraft equipment manufacturers are trying to enter the industry and large commercial airlines have in-house after-sales service departments, independent, long-established service providers like standard aero still have strong competitiveness.

so much so that in july, three people familiar with the matter said standardaero was receiving interest from a handful of private equity firms, including bain capital, blackstone group and cvc capital partners.

however, even though it has received strong interest from potential buyers, an ipo is still an option for standardaero. at the time, two sources noted that an ipo remained a strong potential outcome for standardaero if it did not receive sufficient value in a sale.

now that the boots are on the ground, standardaero gave up on selling and chose to accept an ipo. now, with strong financial performance and prospects, especially in meeting the professional maintenance, repair and overhaul (mro) needs of commercial and military aircraft fleets, its valuation is the value does show appeal.

it is undeniable that this ipo comes at a time when the aviation industry is recovering from the downturn caused by the new crown epidemic. another analyst pointed out: "under the current macro environment, for the ipo market, the next few quarters and even the next few years , we will all enter the golden zone.”