First Reserve in helicopter megadeal, eyes $12bn energy fund

The energy-focussed buyout shop has agreed to buy a Canadian helicopter company for C$3.7bn, the largest-ever deal in the oilfield services sector, as it looks to raise $12 billion for its next fund.

First Reserve Corporation is set to own the world’s largest provider of helicopter services to the offshore oil industry, having agreed a C$3.7 billion ($3.6 billion, €2.5 billion) take-private for CHC Helicopter.

The investment is being made from the firm's 11th fund, which closed on nearly $8 billion in 2006 and remains the largest energy fund raised to date. Though a spokeswoman declined to comment on how much of Fund XI's capital is left to deploy, First Reserve is currently in the market with its 12th fund, targeting $12 billion, according to Probitas Partners' 2008 Private Equity Deskbook. 

The buyout of Toronto- and New York Stock Exchange-listed CHC, which operates in more than 30 countries and also provides coast guard search and rescue services for countries including Ireland and Australia, is the largest-ever LBO in the oilfield services industry, according to a statement from First Reserve and CHC.

to the rescue

“We have been looking at the helicopter services sector on and off for about a decade,” Mark McComiskey, the First Reserve managing director who led the deal, told PEO. First Reserve has been looking specifically at CHC and doing related diligence for “a couple of years” and began engaging directly with the company in the fourth quarter of last year, he added.

The interest in the niche segment of the oilfield services sector is directly linked to the projected global growth of the oil and gas industry, McComiskey said.

The all-cash deal’s debt and equity components were not detailed, though the firms said debt financing has been committed by Morgan Stanley.

Subject to regulatory and shareholder approval, the CHC transaction is expected to close in the second quarter of 2008.

Should First Reserve fail to consummate the transaction, it would be required to pay a C$61.4 million break-up fee, while if CHC elects to take a superior offer in the next 30 days, or to walk away from the deal for other reasons, it would be obliged to pay a $38.5 million break-up fee.

First Reserve has announced a spate of deals lately. It recently purchased Bahama-based Baroco Oil Refining Company for approximately $900 million and agreed to invest $420 million in in the creation of a new uranium company based in South Africa. In December it agreed to take private UK oilfield services firm Abbot Group for £906 million.