Air Transport Services Group, Inc announced that it has agreed to repurchase $50 million of its common shares at $13.07 per share, representing approximately 3.8 million shares, from its largest shareholder, a fund affiliated with Red Mountain Capital Partners LLC. The shares purchased represent approximately 6 percent of ATSG’s outstanding shares.
The transaction was approved by the Board of Directors of ATSG after market close on June 20, with the pricing set based upon a discount to share activity through market close on that date.
The $13.07 transaction price compares with a closing price of ATSG shares of $13.28 on June 20, 2016. It is a discount of 2.5 percent and 6.2 percent, respectively, from volume-weighted average prices of $13.41 for the 10 trading days and $13.93 for the 60 trading days prior to the June 20 closing price. ATSG’s stock closed at a price of $13.17 per share yesterday.
Red Mountain is an investment management firm based in Los Angeles, Calif., with approximately $480 million in discretionary assets under management as of March 31, 2016. Its affiliated fund has been a shareholder of ATSG since 2006. It will continue to hold approximately 11 percent of ATSG shares outstanding following the transaction.
J. Christopher Teets, a partner of Red Mountain and a director of ATSG, said, "Management’s outstanding execution has caused our investment in ATSG to grow to in excess of 30 percent of our assets under management. Accordingly, we were prepared to trim our position in order to accommodate ATSG’s repurchase objectives. We look forward to continuing to work with the management team and the Board as ATSG embarks on its next phase of exciting growth."
Quint Turner, Chief Financial Officer of ATSG, said the transaction is a positive development for the company and for its shareholders. It is consistent with ATSG’s stated goal to significantly reduce the dilutive effect of warrants issued to Amazon for up to 19.9 percent of its shares in connection with new commercial arrangements.
"Like Red Mountain, many of our investors continue to share our confidence in the growth and earnings potential of ATSG and its businesses, which makes this transaction a good deal for ATSG and its shareholders," Turner said. "We are pleased that Red Mountain continues as a major shareholder of the company, and look forward to their continued contributions as ATSG executes its strategic plans. Drawing upon our growing operating cash flow and significant balance sheet liquidity, we will continue to repurchase shares on a more moderated basis, as we also invest in our midsized freighter fleet to support our customers."
ATSG is a leading provider of aircraft leasing and air cargo transportation and related services to domestic and foreign air carriers and other companies that outsource their air cargo lift requirements. ATSG, through its leasing and airline subsidiaries, is the world's largest owner and operator of converted Boeing 767 freighter aircraft. Through its principal subsidiaries, including two airlines with separate and distinct U.S. FAA Part 121 Air Carrier certificates, ATSG provides aircraft leasing, air cargo lift, aircraft maintenance services and airport ground services. ATSG's subsidiaries include ABX Air, Inc.; Airborne Global Solutions, Inc.; Air Transport International, Inc.; Cargo Aircraft Management, Inc.; and Airborne Maintenance and Engineering Services, Inc. For more information, please see www.atsginc.com