The Kinston, North Carolina-based charter operator today said it plans to merge with EG Acquisition Corp. (NYSE: EGGF), a SPAC sponsored by EnTrust Global and GMF Capital.
The announcement this morning follows a similar move by Directional Aviation last week, which is spinning out its OneSky Flight Group that includes fractional operator Flexjet, jet card seller Sentient Jet, on-demand brokers FXAir, and PrivateFly, plus MRO Constant Aviation.
Wheels Up went public via a SPAC IPO in July 2021.
Under the terms of the agreement, FlyExclusive and EG Acquisition Corp. will combine into a new company that is expected to be listed on the New York Stock Exchange and will adopt FlyExclusive as the corporate operating brand.
FlyExclusive Founder and CEO Jim Segrave will lead the combined company.
Prior to launching his current company, Segrave founded Segrave Aviation, which he sold to Delta Air Lines in 2010.
“FlyExclusive is raising the bar in the private aviation industry and creating the best possible experience for customers, partners, and employees so we can create more moments that matter,” said Segrave.
He added, “We are excited to enter the public markets through our business combination with EG Acquisition Corp. This capital, combined with our leadership team’s significant aviation industry experience, will allow FlyExclusive to rapidly grow our workforce, significantly expand our fleet and further invest in our customer experience, while maintaining our core values and family first culture.”
The transaction, once completed, will provide the private jet company “with significant additional capital to continue its growth, better serve customers and execute its strategic plan to become the nation’s first fully vertically integrated private aviation company.”
Leadership remains in place, and plans call for growing at its North Carolina base, where it opened a new maintenance hangar last week.
Additionally, sovereign wealth and U.S. institutional investors are providing $85 million to FlyExclusive, via the purchase of convertible notes that were entered into simultaneously with the signing of the business combination agreement.
The notes will convert into shares of the combined company upon the consummation of the business combination at a price of $10 per share, subject to adjustment in certain instances.
The $85 million from the notes is expected to be primarily used by FlyExclusive for the acquisition of additional aircraft and for related expenses.
Fly currently operates 90 aircraft, which it expects to grow to 154 by 2024.
It has over 800 employees, which will increase to around 2,500.
An investor presentation shows the 2015 start-up grew revenues to $210 million last and expects $360 million this year, with a forecast of $522 million next year and $729 million in 2024.
In 2021 it recorded an EBITDA of $23.8 million and a net income of $7.9 million. It is projecting an EBITDA of $32 million this year with a net income of $9.6 million. By 2024, it expects an EBITDA of $130.0 million and a net income of $102.1 million.
It was named by Robb Report as best in the Jet Cards and Membership category in 2022 Best of the Best Awards.
EG Acquisition Corp. raised $225 million in its initial public offering on May 26, 2021.
Founded in 1997 by Chairman and CEO Gregg S. Hymowitz, EnTrust Global is a global investment firm with approximately $18 billion in total assets.
The firm manages assets for more than 500 institutional investors representing 48 countries. EnTrust has invested nearly $14 billion across approximately 160 transactions in both the private and public sectors, including transportation businesses.
GMF Capital, a private investment platform founded by Gary Fegel in 2013, manages more than $1.5 billion in assets and has invested more than $5.5 billion of assets across 100+ transactions since inception, including in blank check companies and aviation industry assets.
Both EnTrust Global and GMF capital have significant experience with SPAC transactions, having executed several successful business combinations.
Hymowitz serves as CEO and director of EG Acquisition Corp, and Fegel serves as chairman of EG Acquisition Corp.’s Board of Directors.
At the time of EG Acquisition Corp.’s initial public offering, the sponsor agreed not to sell its founder shares for three years after the business combination.
According to the announcement, “Mr. Hymowitz and Mr. Fegel believed, and continue to believe, that this longer ‘lock-up’ period should better align the interests of the sponsor with those of EG Acquisition’s investors. As such, with certain limited exceptions, the sponsor will continue to be invested in the combined company for at least three years after the completion of the business combination. In addition, Mr. Hymowitz and Mr. Fegel are expected to serve as directors on the board of directors of the combined company.”
Under the terms of the agreement, the transaction values FlyExclusive at a pre-transaction equity value of $600 million and is expected to provide up to $310 million in proceeds, including the $85 million of committed convertible notes and $225 million of SPAC cash.
Boards of both EG Acquisition Corp. and FlyExclusive have approved the proposed transaction.
Completion of the proposed transaction is subject to the approval of EG Acquisition Corp. stockholders and other customary closing conditions.
The parties expect that the proposed transaction will be completed in Q1 2023.
FlyExclusive, which only launched its Jet Club jet card membership in 2020, grew from 164 members in June of 2021 to 492 this June. It expects that number to jump to 852 members by June 2023 before growing to 1,212 members in 2024.
Prior to launching Jet Club, FlyExclusive focused on the wholesale market.
It lists Vista Global’s Apollo Jets and XO, Directional’s FXAir, Wheels Up, Jets.com, and Unity Jets as top B2B customers. These flights are typically sold within three days of departure and fill in the schedule.
Currently, 30 of its aircraft are designated for wholesale customers through guaranteed revenue programs. The GRPs give FlyExclusive guaranteed flight hours per quarter.
In announcing the IPO, Fly said, “Expansion of the fractional program to the mid and super-mid categories is expected immediately.”
The investor presentation shows the fractional fleet to grow from six light jets in 2023 to 46 airplanes by 2026, with 21 light jets, 16 midsize aircraft, and nine super midsize jets.
Looking forward, it expects Jet Club revenue to grow from 18% of flight revenues in 2021 to 33% this year and 45% by 2024.
GRPs are expected to continue, making up 20% of revenues, with 14% from fractional customers and 14% via wholesale.
Currently, 99.6% of Jet Club customers are accommodated in its fleet. Even with growth, it expects only to have 14 members per aircraft, something it says is below competitors who average 20 to 60 program members per tail.
The presentation notes, “Competitors with high ratios are unable to operate cost-effectively.”
Last week FlyExclusive opened a new maintenance hangar in Kinston with another in the works.
Building its in-house maintenance to 80% from 20%, it says, will also increase dependability.
Nearly half (43.9%) of Private Jet Card Comparisons’ subscribers report they have experienced delays, cancelations, and service disruptions in the past year as the industry has struggled with record demand, supply chain, and labor issues.
Fly is also planning to invest in simulators which will allow it to train 88% of pilots in-house, something it says will “remove the biggest bottleneck in the industry.”
Tommy Sowers, Fly Exclusive’s President and COO, previously told Private Jet Card Comparisons the company plans to be “the most vertically integrated” private aviation company.
Last year, it opened a paint and refurbishment center in Kinston.