Avianca Holdings S.A. (AVH), a leading Latin American airline with principal offices in Panama City, Republic of Panama, plans to raise $504 million in its upcoming public offering. AVH currently trades on the Colombian Stock Exchange (PFAVH). The listing in the U.S. will give this airline increased visibility.
The firm will offer 27,234,910 shares (including 54% insider shares) at an expected price range of $17-$20 per share. If the offering hits the midpoint of that range at $18.50 per share, AVH will command a market value of $2.3 billion. The offering is expected on Wednesday, November 6th.
AVH filed on September 19, 2013.
Lead Underwriters: Citigroup Global Markets, JP Morgan Securities LLC
Underwriters: Banco BTG Pactual SA Cayman Branch, BofA Merrill Lynch, Deutsche Bank Securities Inc, UBS Investment Bank
AVH is a leading Latin American airline covering the Andean region and Central America. The firm is the result of the 2010 merger of Aerovias del Continente Americano-Avianca SA (Avianca) and Grupo Taca Holdings Limited (Taca); the former had covered Colombia, Ecuador, and Peru, while the latter had covered Belize, Guatemala, Honduras, Panama, El Salvador, Costa Rica, and Nicaragua. The firm's internal data indicates that it was the leading international carrier in terms of passengers within the Andean and Central American markets in 2012. The firm's hubs are located in Colombia, Peru, and El Salvador. The airline schedules over 5500 flights per week to over 100 destinations in over 25 countries; for the six months ended June 30, 2013, AVH carried approximately 11.9 million passengers and 151,248 metric tons of cargo.
AVH offers the following figures in its F-1 balance sheet for the six months ending June 30, 2013:
Net Income: $147,506,000
Total Assets: $4,794,732,000
Total Debt: $2,163,200,000
Stockholders' Equity: $926,126,000.00
AVH has seen rapid growth in terms of revenue and operating profit since the conclusion of the 2010 merger. Consolidated operating revenue grew from $3.79 billion in 2011 to $4.27 billion in 2012, while consolidated operating profit increased from $202.4 million in 2011 to $280.9 million in 2012.
AVH's fleet as of June 30, 2013 included 119 jet passenger aircraft, 28 turboprop passenger aircraft and four jet cargo aircraft. The firm has made efforts since the time of the 2010 merger to reduce the variety of models it operates, which allows for greater efficiency in fleet operations. AVH has demonstrated a commitment to upgrading and expanding its fleet with orders for 68 new Airbus aircraft and 15 Boeing 787 Dreamliners to be delivered between 2013 and 2019, along with orders for 15 new ATR72 aircraft to replace some of its aging regional fleet. These expenditures have put significant debt obligations on the company, meaning that a significant portion of its revenues will be dedicated to debt service for the foreseeable future.
AVH faces numerous competitors in both regional and international flights. Major competitors include Copa Airlines (CPA), LATAM Airlines Group (LFL), American Airlines, United (UAL), Delta Air Lines (DAL), Aeromexico, JetBlue Airways (JBLU), and Aerolineas Argentinas. Some of these competitors have larger customer bases and better capitalization and access to financing than AVH.
Fabio Villegas Ramirez has served since the time of the Avianca/Taca merger in February 2010 and was Avianca's CEO from 2005 until the merger. He previously was president of the Columbian National Association of Financial Institutions, and has worked as managing director for both Deutsche Bank and Trothschild Group. He holds a degree in economics from Universidad Jorge Tadeo Lozano in Bogotá, a diploma in development planning from London University, and a master in science from the London School of Economics.
We are optimistic on this public offering and rate it a buy for growth oriented investors. AVH appears to be taking full advantage of its merger, with rapidly growing revenues and profits over the past two years. Its position as the leading international carrier in its home regions and as the leading domestic carrier in Colombia (the third largest market in Central America) should give AVH the leverage it needs to continue to grow. Unfortunately, much of the proceeds from the offering will not be put towards the company's needs, with 54% of the offered shares coming from insider sources, but this is nonetheless a valuable opportunity to buy into an airline on the rise.