AAR CORP. Expands Aviation Market Reach through Acquisition of MRO Holdings

AAR CORP. has recently made headway in the aviation aftermarket sector, announcing a definitive agreement that will see it acquire a 65% controlling stake in MRO Holdings, valued at an enterprise value of $4 billion. This strategic acquisition is poised to significantly bolster AAR's scale, enhance margins, and boost its overall cash flow profile, marking a transformative step in the company's growth strategy.

The acquisition is expected to contribute over $1 billion in revenue, primarily stemming from an extensive customer base that includes several premier U.S. airlines. Following the completion of this transaction, AAR anticipates an increase in its adjusted EBITDA margins from approximately 12% to 16%, before realizing further synergies. This is a pivotal moment for AAR, as it embarks on a path that may lead to an adjusted EBITDA margin target of around 19% to 20% within the next three to four years.

Founded over four decades ago, MRO Holdings is recognized as a leading provider of aircraft maintenance, repair, and overhaul (MRO). With a team of about 10,000 professionals and a capacity for comprehensive airframe maintenance, MRO Holdings services a wide network throughout the Americas, including facilities in El Salvador, Mexico, Colombia, and the United States. Notably, approximately 90% of its revenues are derived from U.S. customers, underscoring its importance within AAR’s strategic operations.

John M. Holmes, Chairman, President, and CEO of AAR, remarked, “This acquisition of MRO Holdings establishes the world's largest heavy maintenance organization, enhancing our service capacity for nearly 3,000 aircraft annually across our hangars.” He highlighted that this merger will not only increase the volume of work directed to AAR's Component MRO facilities but also broaden their existing Original Equipment Manufacturer (OEM) relationships and augment their data collection capabilities which are crucial for their software business.

The transaction will drive AAR to control a significant portion of heavy maintenance services in a region that is strategically vital. MRO Holdings is projected to generate roughly $1 billion in revenue and $285 million in adjusted EBITDA for the calendar year 2026, complementing AAR's operational excellence. The synergy generated from this acquisition is expected to amount to $75 million through risks and opportunities stemming from procurement savings, operational optimization, and the integration of lucrative operational best practices.

AAR plans to finance the acquisition through a mix of new debt totaling approximately $2.1 billion, an investment of around $780 million from equity transactions at $135 per share with existing MRO Holdings shareholders, and a further $230 million from a private investment in public equity (PIPE). This collaboration aims at amplifying AAR's aftermarket capabilities while retaining financial flexibility to continue its growth strategy.

Roberto Kriete, Chairman of MRO Holdings, conveyed optimism about the merger, stating, “Combining our technical expertise and customer relationships with AAR's broader aftermarket offerings will strengthen our value proposition.” This sentiment was echoed by Matt Evans from Bain Capital, who expressed pride in being part of MRO's growth trajectory and confidence in AAR’s potential to cultivate continued value creation as they advance together.

As AAR moves forward with this transformative venture, both companies are poised for a future marked by growth and operational excellence. The anticipated completion of this transaction is expected in AAR's fiscal third quarter, pending customary regulatory approvals. With all eyes on the aviation industry’s future, this acquisition positions AAR at the forefront of innovation and customer service excellence, establishing a robust foundation for scalable growth.

In conclusion, the acquisition of MRO Holdings exemplifies AAR CORP.'s commitment to enhancing its operational portfolio within the aviation aftermarket. This merger is not just a financial transaction but a strategic alignment aimed at providing superior customer service and expansive offerings, redefining how AAR approaches the competitive landscape of the aviation industry.