Monocle Acquisition (MNCL) and AerSale Announce Revised Merger Agreement

Monocle Acquisition Corporation (Nasdaq: MNCL), a public investment vehicle, and AerSale Corp. ("AerSale" or the "Company"), a leading integrated, global provider of aviation aftermarket products and services, today announced that they have entered into a revised agreement to merge in a transaction with a fully diluted enterprise value of approximately $300 million, equating to approximately 5.5x AerSale's forecasted 2021 Adjusted EBITDA. The combined company will be named AerSale Corporation and is expected to be publicly traded on the Nasdaq Stock Market. The parties anticipate closing the transaction early in the fourth quarter, after receipt of shareholder approval.

The revised merger agreement is supported by AerSale's current owners – Leonard Green & Partners, Florida Growth Fund LLC and the Company's two founders – and was unanimously approved by the boards of directors of both Monocle and AerSale. The transaction will be funded by a combination of cash held in Monocle's trust account and common stock in the surviving company to be issued to existing AerSale shareholders. AerSale will retain the first $50 million of cash proceeds from Monocle's trust account and 40% of all trust proceeds in excess of $50 million. As a result of this new structure, AerSale will be debt-free at close. Further, assuming no redemptions from the trust account, it is anticipated that AerSale will have approximately $128 million of cash on its balance sheet and $110 million of additional liquidity available under its existing asset backed debt financing facility.

Following completion of the transaction, the current owners will receive approximately $76 million in cash and $241 million in newly issued common equity, representing approximately 56% of the outstanding shares of the combined company, assuming no redemptions by Monocle's existing public shareholders. The current owners will also have the right to receive 3 million shares of contingent consideration depending upon the achievement of certain stock price performance targets. AerSale's current owners can elect to receive all of their transaction consideration in the form of common equity in the surviving company, in which case the cash consideration will be divided pro rata by the non-electing owners, if any, or if all of AerSale's current owners make such election, the cash consideration will be paid to the surviving company. Those who elect to receive their transaction consideration in the form of common equity will receive additional shares of common equity at closing, and will also have the right to receive additional shares of contingent consideration depending on the achievement of certain stock price performance targets. The remaining outstanding shares of the combined company will be held by public stockholders and the founders of Monocle.

On a pro forma basis, AerSale expects to generate approximately $307 million in revenue and a 17.6% Adjusted EBITDA margin for the full year 2021. As the aviation market recovers, the Company forecasts significant revenue and Adjusted EBITDA growth over the next several years resulting from the unprecedented availability of attractively-priced retired aircraft and engines for acquisition, the growth in the e-commerce and air cargo markets, the increasing contribution of MRO products and services, the rollout of higher margin proprietary engineered products and services, increased penetration of the government and defense marketplace, improved operating leverage, and continuing M&A activity.

Investment ThesisThe revised transaction structure was created to maximize AerSale's ability to succeed in the current environment, providing a strong, debt-free balance sheet with substantial available liquidity. Monocle believes the revised transaction presents a compelling opportunity for investors representing the best public company opportunity to benefit from the recovery in the commercial aviation market. Investors will have the opportunity to:

• "Buy-in" at the trough in the market with a valuation well below market peers;
• Invest alongside a highly experienced management team that has a track record of being good capital allocators;
• Invest in a transaction that strongly aligns the interests of all parties; and
• Invest in a company with:
  • ample capital to take advantage of the unparalleled market opportunity;
  • a differentiated business model designed to maximize return on investment and sustain cash flow across cycles; and
  • multiple levers for sustained organic growth across existing and new business lines.

Following completion of the transaction, AerSale will be led by its highly experienced management team, including Co-Founder, Chairman and Chief Executive Officer Nicolas Finazzo; Co-Founder and Executive Vice Chairman Robert Nichols; Division President of MRO Services Basil Barimo; Division President of Airframe & Engine Materials Gary Jones; Chief Technology Officer and Division President of Engineered Solutions Iso Nezaj; Division President of Aircraft & Engine Management Craig Wright; and Chief Financial Officer Martin Garmendia. It is anticipated that the Board of Directors of the combined company will be comprised of nine members: its two co-founders, Mr. Finazzo and Mr. Nichols; three members appointed by the Monocle management team; and four members appointed by Leonard Green & Partners.

Mr. Finazzo commented, "I am very proud of the resilience of our business and our team over the past several months. The aviation industry has fallen into a trough that is much deeper than we ever could have anticipated, yet our Company and team are purpose-built to be able to navigate these conditions. This trough represents a buying opportunity we have been waiting a decade for – since the financial crisis of 2008 – to acquire mid-technology aircraft that feed our Asset Management Solutions business. Further, we are extremely well positioned to profit from the dramatic increase in stored aircraft, with over 500 mostly mid-technology aircraft stored at our facilities to date, providing us with an unanticipated and highly profitable source of business. Storing these aircraft gives us a significant competitive edge as we look to acquire new feedstock with lower acquisition, transition, and logistics costs, and decreased time-to-market. We also intend to aggressively pursue exciting growth opportunities in e-commerce, air cargo and proprietary engineered solutions. We look forward to partnering with the Monocle team, and to the continued support of Leonard Green, as we move forward in building our Company."

Jonathan Seiffer, Senior Partner at Leonard Green & Partners, added, "This revised agreement reflects our long-term commitment to supporting AerSale's management team and our confidence in the vision we have pursued together over the past decade. In particular, the new structure positions AerSale to emerge from this deep industry crisis with the financial strength needed to continue building its leadership position in aviation aftermarket products and services. Despite the unprecedented challenges the entire industry will face for some time, we remain very confident in AerSale's future."

Eric Zahler, Chief Executive Officer and President of Monocle, commented, "Beginning in the earliest days of the pandemic, the AerSale management team took bold action to enable the company to weather these unprecedented conditions and to be strongly positioned for the eventual upturn. As a result of their efforts to properly manage costs and to pursue available revenue-producing opportunities, AerSale had been cash flow positive every month. Given the Monocle and AerSale teams' extensive experience in executing and integrating strategic acquisitions, we look forward to collaborating to consolidate the fragmented industry at what we expect will be attractive valuations. We thank the team at Leonard Green for its collaboration and for its willingness to continue supporting AerSale by partnering with us to create a capital structure that will give the Company the financial flexibility it needs to succeed as the market recovers and beyond."

"At a time when the passenger sector of the global aviation industry has been severely challenged by the pandemic, AerSale has benefited from its robust and growing participation in the cargo and military components of the market," added Sai Devabhaktuni, Chairman of Monocle. "These businesses have generated meaningful and rapidly growing revenue, especially as consumers have depended more heavily on e-commerce. The AerSale management team has done a masterful job of capitalizing on these attractive near-term opportunities and preparing for the long-term benefits as the industry normalizes. Now that certain geographic markets are beginning to reopen and we can start to envision an eventual recovery, our conviction in our investment thesis for AerSale remains very strong."

Monocle is being advised by PJT Partners; Cowen; Cadwalader, Wickersham & Taft LLP; Greenberg Traurig, LLP; and Alton Aviation Consultancy. AerSale is being advised by RBC Capital Markets; Harris Williams and Latham & Watkins LLP.

Teleconference Information Monocle and AerSale will host an investment community teleconference regarding the revised agreement tomorrow, Wednesday, September 9, 2020, at 8:00 am ET. The teleconference and accompanying slide presentation can be accessed by visiting https://event.on24.com/wcc/r/2624949/A80C0DFA4C2D75671638696F9E7C0EDA. The teleconference can also be accessed by dialing 800-938-2243 (US) or 402-220-1122 (international).

A replay will be available beginning on Wednesday, September 9, 2020 at 10:00 a.m. ET. The replay can be accessed at the same link as the teleconference.

Monocle has filed the investor presentation relating to the proposed transaction with the SEC as an exhibit to a Current Report on Form 8-K, which is available on the SEC's website at www.sec.gov.

You May Also Be Interested In

• IBM (IBM) to Acquire HashiCorp (HCP) for $35/sh Cash or $6.4B
• SeaChange (SEAC) Announces an Agreement to be Acquired by Enghouse and Termination of Previously Announced Proposed Acquisition by Partner One
• AZZ, Inc. (AZZ) Announces Proposed 4M Share Offering