On Monday, Canada’s Caisse de dépôt et placement du Québec (CDPQ), the Montreal-based institutional investor with C$333 billion in assets under management, announced a $150 million equity investment in CAE, a leader in training and operational support for the global civil aviation, defence and security and health care markets.

CDPQ’s investment will help the Québec company’s expansion plans, including its bolt-on acquisition (also announced on Monday) of European flight training and pilot provisioning company Flight Simulation Company (FSC) B.V., which will allow CAE to expand its capacity to offer training services to European customers, primarily airlines and cargo carriers. The transaction was done in conjunction with the company’s previously announced drive to raise $300 million in capital.

“Our investment is rooted in a desire to support a resilient Québec business like CAE in its recovery and growth efforts. In a global context that is challenging for the aeronautics sector, CAE continues to demonstrate the capacity to innovate in various growth sectors of the economy and strengthen its competitive position with a view to fully resume activities,” declared Kim Thomassin, CDPQ’s Executive Vice-President and Head of Investments in Quebec and Stewardship Investing.

Recurring revenue

CDPQ noted that despite the unprecedented situation created by COVID-19, Québec-based CAE company has “proven the resilience of its business model over the last year.”

More than 60 percent of CAE’s revenue is recurring in nature. It operates the largest network of civil aviation training facilities (at more than 50 sites) worldwide, provides integrated live-virtual-constructive (LVC) training solutions for air, naval, land, and public training safety, provides healthcare training including a suite of virtual and augmented reality surgical and ultrasound simulators (it also produces ventilators).

Simulation

CAE’s acquisition of Flight Simulation Company B.V. (FSC) for approximately EUR 70 million (approximately C$108 million) in cash implies an enterprise value of €100 million (approximately C$155 million) to FSC.

The deal will provide CAE with an expanded portfolio of customers and an established recurring training business which is highly complementary to CAE’s network. FSC is based in Amsterdam, in proximity to Schiphol Airport, and includes a modern fleet of mainly CAE-built full-flight simulators (FFSs) and training devices, comprised of nine narrow body B737 and A320 FFSs, two widebody aircraft FFSs and one regional jet. The acquisition, consistent with CAE’s internal acquisition criteria and capital allocation priorities, is expected to be accretive to earnings in its first full year.

“CAE is well positioned in the current environment, with access to bolstered capital resources, to enhance its market presence with selective, value-based acquisitions within its core. The acquisition of FSC will allow CAE to better support its customers and expand its addressable market,” said Marc Parent, CAE’s President and Chief Executive Officer.

Caisse de dépôt et placement du Québec (CDPQ) is a long-term institutional investor that manages funds primarily for public and parapublic pension and insurance plans. One of Canada’s leading institutional fund managers, CDPQ invests globally in major financial markets, private equity, infrastructure, real estate and private debt

CAE is a high technology company, at the leading edge of digital immersion, providing solutions to make the world a safer place. They describe themselves as “the partner of choice to customers worldwide who operate in complex, high-stakes and largely regulated environments, where successful outcomes are critical.”

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