Equities

Gores' Platinum Buys Héroux-Devtek for $1B, C$32.50/Share

Platinum Equity to Acquire Héroux-Devtek for $1 Billion; Incora Faces $250 Million Debt Dispute Ruling

By Alex P. Chase

7/11, 13:58 EDT
BlackRock, Inc.
JP Morgan Chase & Co.
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Key Takeaway

  • Platinum Equity to acquire Héroux-Devtek for $1 billion, paying C$32.50 per share, a 28% premium; deal closes by March 2025.
  • U.S. Bankruptcy Judge rules $250 million rescue financing for Incora was improperly authorized, restoring bondholders' liens on assets.
  • Incora's restructuring plan aims to eliminate $2 billion in debt, with shared ownership likely between JPMorgan and Silver Point groups.

Platinum Equity Acquires Héroux-Devtek

Platinum Equity Advisors LLC has agreed to acquire Canadian aerospace manufacturer Héroux-Devtek Inc. for approximately $1 billion, including debt. The deal, supported by Quebec’s largest pension fund, involves Platinum paying C$32.50 in cash per share, representing a 28% premium to the previous day's closing price. Héroux-Devtek’s senior management, including Executive Chairman Gilles Labbé, will roll over some of their shares. The transaction is expected to close by the end of March 2025. As of 10:43 a.m. in Toronto, Héroux-Devtek’s shares were trading just below C$31.

Platinum Equity plans to maintain Héroux-Devtek’s headquarters and research and development facilities in suburban Montreal. The Caisse de Depot et Placement du Quebec, the largest shareholder with about 14%, has expressed its support for the deal. “I have great respect for the long tradition and proud history of the aerospace sector in the province and the contributions Héroux-Devtek has made to the industry,” said Platinum Co-President Louis Samson.

National Bank Financial, Bank of Nova Scotia, and Desjardins Capital Markets advised Héroux-Devtek and its board, while BMO Capital Markets advised Platinum and is the lead arranger of financing.

Incora Debt Dispute Ruling

In a significant ruling, U.S. Bankruptcy Judge Marvin Isgur determined that a $250 million rescue financing deal for Platinum Equity-backed Incora was improperly authorized. The 2022 deal, which involved investors like Silver Point Capital and Pacific Investment Management Co. (Pimco), was contested by bondholders including JPMorgan Chase & Co., BlackRock Inc., and King Street Capital Management. The judge's decision restores the liens on Incora’s assets for the disgruntled bondholders, enhancing their recovery prospects.

The ruling is notable among distressed debt players who have been exploring the boundaries of contract law with innovative financing strategies. Judge Isgur emphasized that his decision is based on the specific lending documents between Incora and its bondholders and does not challenge the legality of all uptier transactions. “This decision does not challenge the legality of uptiering transactions,” Isgur stated. “Parties are free to contract and take to risks within their contracts.”

Implications for Incora's Restructuring

Judge Isgur's ruling does not impede Incora from seeking approval for its bankruptcy-exit plan. Since filing for Chapter 11 bankruptcy last year, Incora has restructured its operations, shed unprofitable contracts, and negotiated better terms with customers. The restructuring plan aims to eliminate $2 billion from its balance sheet, offering senior creditors stock and new debt in exchange for reducing their existing debt holdings.

The ruling means that both the JPMorgan side and the Silver Point group will have claims on Incora’s assets, likely resulting in shared ownership of the company, which is valued at approximately $1.65 billion. The 2022 transaction provided Incora with much-needed cash but altered debt terms in a way that excluded certain creditors, leading to the current legal dispute.

Street Views

  • Louis Samson, Platinum Equity (Bullish on Héroux-Devtek):

    "I have great respect for the long tradition and proud history of the aerospace sector in the province and the contributions Héroux-Devtek has made to the industry."