South African ACMI/charter specialist Solenta Aviation (SET, Johannesburg O.R. Tambo) will acquire a 28% stake in fastjet plc, the parent firm of Tanzanian LCC Fastjet (Dar es Salaam) and its Fastjet Zimbabwe (FN, Harare International) sister carrier.
A disclosure to the London Stock Exchange (LSE) shows that as part of the transaction, fastjet will wet-lease three Embraer Regional Jets from Solenta over the next five years.
Initially, the wet-leased aircraft will be E145s, which fastjet management believes are well suited as replacements for its A319-100s on its thinner/shorter routes. fastjet will have the right to replace these aircraft with E190s/195s or ATR72-600s, subject to a what it says is a "fair and reasonable adjustment" to the hourly rate.
"This will give the Company the opportunity to sub-lease its current A319s saving further costs and provide the Company with the flexibility to grow its capacity in-line with demand as existing routes develop and new routes are set up," fastjet said.
fastjet will issue Solenta approximately 95.6 million new ordinary shares valued at GBP0.163 per share (or GBP15.6 million (USD19.2 million) in total) to acquire a Solenta group SPV, Aircraft and Services Limited, that will own the right to enter into the three wet-leases. In return, Solenta will offer discounts to the tune of USD19.2 million on the future cost of services provided while gaining the right to nominate two directors to the Board of fastjet.
The transaction is expected to close on January 24, 2017.
fastjet also expects to benefit from Solenta Aviation's expertise in operating across Africa. Aside from its South African mother company, it has five active subsidiaries including Solenta Aviation Côte d'Ivoire, Solenta Aviation Gabon, Solenta Aviation Ghana, Solenta Aviation Kenya, and Solenta Aviation Mozambique with pending AOC applications in a further seven countries.
In this context, fastjet will be able to deploy Solenta aircraft on any one of Solenta's AOCs on the African continent under the fastjet brand in exchange for a cost contribution / revenue share, depending on use. Solenta has also granted fastjet the right to acquire currently, or in the future, a stake in an AOC under the control of Solenta.
In tandem with the Solenta deal, fastjet also announced a proposed accelerated bookbuild to raise gross proceeds of not less than USD28.8 million. The drive has the support of the firm's major institutional shareholders
"Our agreement with Solenta represents a good operational and strategic fit," fastjet's Interim Chairman and CEO, Nico Bezuidenhout, said. "It provides fastjet with access to fleet and related services which, together with the funds raised through our proposed Placing, will allow us to successfully implement the final stages of our Stabilisation Plan.
"We have made good progress with the Plan and the near-term priority continues to be to fully stabilise the business and to reach cash flow break even by the fourth quarter of this year. As well as helping us to achieve this objective, the fundraising and Solenta Agreement will also provide the platform from which to flexibly and cost-effectively pursue fastjet's medium to long-term objective of becoming the first truly pan-African low-cost airline."
