05/16/2012 02:58 EDT | Updated 07/16/2012 05:12 EDT

CAE enters pilot sourcing business with $314 million acquisition

MONTREAL - CAE Inc. is entering the pilot outsourcing business while also expanding its global flight training capabilities by acquiring Oxford Aviation Academy and a subsidiary for $314 million.

The Montreal-based company said Wednesday the acquisition of Oxford subsidiary Parc Aviation will add 1,200 pilot and maintenance crew on assignment with 50 airlines and leasing companies in 40 countries, primarily in Asia.

"It's very attractive when you think about that not only is it a new line of business, but the customers are the same airlines that we deal with today," chief executive Marc Parent said in an interview.

"We're always pitching our capabilities to airlines around the world and so I think this ... adds an arrow to our quiver."

Parc is the world leader in such outsourcing work and CAE plans to maintain that status.

With airlines strained to find the 20,000 pilots needed annually, this new division could provide some of the required personnel, Parent said.

CAE (TSX:CAE) said Wednesday the addition of seven training centres will increase its global network to 42 sites that will train civil aviation pilots, cabin crew and maintenance personnel.

The leading manufacturer of flight simulators will also add 40 simulator units for a total of 211.

"This is good for Montreal, good for Canada. We're very strong in aerospace and I think we become even stronger," Parent added.

He said the addition is especially good for its Montreal headquarters where it designs and manufactures full flight simulators, although it wouldn't immediately result in additional hirings.

The addition of four flight schools will increase its training capacity by 67 per cent to 1,500 cadets annually at 12 locations around the world.

Oxford's training facilities are located in Denmark, Norway, Sweden and the UK, and its academies are in Britain, U.S., Australia and Hong Kong.

Oxford Aviation Academy had annual revenues of $280 million, split about evenly between training and pilot sourcing.

CAE said the acquisition, funded with a new senior unsecured credit facility, will add to earnings in fiscal 2014. It expects to generate $15 million in synergies over 12 to 15 months through reduction of overlapping overhead, management and other costs.

Parent said CAE has had its eye on this business for about 10 years and approached Oxford's owners London-based private equity fund STAR Capital Partners and General Electric in recent months.

"They have locations and customers which are interesting to us, that complements our's right in our sweet spot of providing a total solution to airlines."

Benoit Poirier of Desjardins Capital Markets said the transaction reinforces CAE's strong position in the civil aviation training market.

"We anticipate this market should do well over the coming years, in light of the expected increase in the global aircraft fleet, increasing demand for simulation-based training and the need for younger pilots as older pilots near retirement," he wrote in a report.

On the Toronto Stock Exchange, CAE shares closed up two cents at $10.02 in Wednesday trading.