Oak Hill to acquire air cargo provider(3)

The Robert Bass-led firm has strengthened its aerospace portfolio with the acquisition of air cargo company Southern Air. The deal puts the firm on track to own 22 freight aircraft.

Oak Hill Capital Partners is bolstering the air cargo aspect of its aerospace portfolio with its agreement to buy Southern Air, a global air cargo provider.

Financial terms were not disclosed for the transaction, which is expected to close in September.

Southern Air will be combined with an existing Oak Hill portfolio company, Cargo 360, to create Norwalk, Connecticut-headquartered Southern Air Holdings. Post-transaction, the company will operated 13 Boeing 747 “classic” freighters, and has contractual agreements to acquire three more freight aircraft in 2008.

In April, Oak Hill placed a $1.4 billion order for six Boeing 777 freight planes, which the firm plans to lease.

Demand for freight planes is expected to swell: Boeing projects the global air cargo industry to grow by 6.1 percent annually, on average, for the next 20 years.

Since Oak Hill began actively looking at the aerospace sector in 2003, it has also purchased approximately 25 passenger aircraft which are leased to airlines around the world. More than half of those planes are Boeing 737s.

Rowan Taylor leads the firm’s aerospace investments, and works with managing partner Denis Nayden, who heads Oak Hill’s industry groups focused on investments in basic industries and business and financial services.

Guggenheim Aviation Partners, a division of financial services group Guggenheim Partners, and alternative asset manager Fortress Investment Group also have made significant investments in aircraft.

Guggenheim currently has more than 40 aircraft, many of which it converted from passenger to freight planes to meet global demand.

In January, Guggenheim sold 38 aircraft from its debut aviation fund to Aircastle Limited, a publicly traded aircraft acquirer and lessor that is controlled by Fortress.