London's Permira To Purchase Major Stake In Hong Kong's Topcast Aviation In $270 Million Deal

China Aviation Industry
Workers service a Dragonair Airbus A320-200 plane at Hong Kong International Airport (Photo: Reuters / Amr Abdallah Dalsh)

European private equity firm Permira is remaining positive in the continued growth of China's aviation sector as evident in its latest acquisition.

The London-based company has revealed that it agreed to purchase a majority stake in Hong Kong-based aircraft parts distributor Topcast Aviation Supplies in a multi-billion dollar deal.

According to the head of Permira Asia, Alex Emery, the decision to acquire the majority stake was partly due to a set succession plan by its founders. Topcast has been under the control and management of its founders for more than three decades.

Its founders, including Thomas Hung, had apparently decided to sell a majority of their stakes in the company with the goal of having someone else take over and steer the business forward. Hung and his fellow co-founder Calvin Li will reportedly still hold on to a minority stake in the firm.

Permira did not reveal the financial details of the acquisition, but reports citing sources close to the deal have revealed that Permira is aiming to buy a 90 percent stake in the company. With Topcast currently having an enterprise value of around $300 million, the transaction will likely be worth around $270 million.

Emery mentioned in a statement that the company still expects substantial growth in China's aviation industry in the long-term. The company believes that China's economic growth will continue to develop in the next decade and this will drastically drive demand for travel and tourism. The establishment of new airports and the addition of massive passenger volume will eventually make their investment worthwhile.

While Permira may be looking at the long-term, the industry itself is currently dragging to a snail's crawl due to several underlying factors. In June, China's passenger volume growth came to a halt as the ongoing trade dispute between the country and the United States have affected travel demand in the region.

The growth in the air cargo volumes in the country have also dramatically slowed down as a direct result of the year-long trade dispute. According to data from the International Air Transport Association, international freight traffic had declined by more than 5.8 percent in June.

Permira stated that the escalation in the trade way will have an effect on the industry, but it will likely only be a short-term impact. The firm is still adamant that China remains to be the fastest-growing aviation market in the world. Permira's acquisition of the majority stake in Topcast is expected to be completed in November of this year. The deal will of course still need to undergo regulatory reviews before it can push through.

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