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Capital A Berhad is selling its aviation business to subsidiary AirAsia X Berhad
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The plan includes disposal of its aviation business, namely AirAsia Berhad (AirAsia Malaysia) and AirAsia Aviation Group Ltd. (AirAsia subsidiaries in Thailand, Indonesia, Philippines, and Cambodia)
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The move is aimed at streamlining Capital A and facilitating a business-centric valuation of the separate entities
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AAX said the move positions it to become the overarching regional aviation provider for all short and medium-haul routes under the AirAsia brand name
Capital A Berhad is selling its aviation business to AirAsia X Berhad (AAX).
The parent firm of AAX, Capital A entered into a non-binding letter of offer with AAX for the proposed disposal of its aviation business, namely AirAsia Berhad (AirAsia Malaysia) and AirAsia Aviation Group Ltd. (AirAsia subsidiaries in Thailand, Indonesia, Philippines, and Cambodia).
The move is aimed at streamlining the group and facilitating a business-centric valuation of the separate entities, potentially unlocking greater value to shareholders, the aviation and travel services group said in a statement.
Capital A chief executive officer Anthony Fernandes said the group’s businesses “are ready to grow” and needs to raise funds for expansion but gaining access to capital has been challenging due to Capital A’s Practice Note 17 (PN17) status. Capital A fell into Bursa Malaysia Securities Berhad’s PN17 list of financially distressed entities in January 2022.
“To address this and to ensure a robust financial injection, we are strategically pursuing the sale of the aviation business to AAX to create an aviation pure play, consolidating both long and short-haul airlines under the AirAsia brand, subject to the negotiation of a definitive share sale and purchase agreement and its completion,” Fernandes explained.
Following the disposal, he said the aviation business is poised to benefit from focused management and a well-defined strategic direction, which will boost the aviation business’s capacity to seize growth opportunities, expand market share, and ultimately achieve enhanced profitability.
“We are confident that by separating the aviation business from Capital A, the non-aviation businesses within the group, which we feel are currently undervalued by the market, will also be recognised for their intrinsic value and potential,” Fernandes said.
AAX in a separate statement said the move positions it to become the overarching regional aviation provider for all short and medium-haul routes under the AirAsia brand name.
The acquisition is expected to provide “unparalleled advantages, including a strengthened market position, increased operational efficiency, and ultimately driving cost savings and enhanced financial performance”, the airline said.
AAX said the decision to combine the airline businesses through these acquisitions leverages the airline’s recovery trajectory after its upliftment from PN17 status in November 2023.
Capital A’s companies, including Teleport (logistics), Capital A Aviation Services (maintenance, repair, overhaul and inflight), and MOVE digital, meanwhile, will also be raising capital, offering shareholders an uplift on their Capital A shares, complemented by shares in the enlarged aviation group under proposed shares distribution.
Capital A said the decision to create a pure play entity aligns with market preferences, providing clearer understanding, valuation, and appreciation for the distinct strengths of both aviation and non-aviation businesses.
Following the completion of the aviation disposal, Capital A said it is committed to presenting a comprehensive PN17 regularization plan by June 30, 2024.
