KUALA LUMPUR (Feb 28): Capital A Bhd is carving out the manager of its aviation brand AirAsia and injecting it into Nasdaq-listed special purpose acquisition company (SPAC) Aetherium Acquisition Corp for US$1.15 billion (RM5.48 billion) — a move to pave way for its exit from Practice Note 17 (PN17) status, besides selling its aviation business to AirAsia X Bhd.
In return, Capital A will get an equity stake worth US$1 billion in the US-listed entity, which will be called Capital A International (CAPI). On top of that, Capital A will also offload a US$150 million loan to CAPI as part of sale consideration settlement.
The proposal announced also includes distribution of CAPI shares to Capital A's shareholders.
Capital A, which owns low-cost carrier AirAsia Bhd, said it has entered into a letter of intent with Aetherium for the reverse listing of its brand management outfit CAPI on Nasdaq in the US.
The proposed plan is to merge Aetherium with a unit of CAPI, which will house the AirAsia brand and a portfolio of other owned trademarks or intellectual properties (IPs).
As CAPI takes over Aetherium’s listing status, Capital A will receive 94% of its enlarged share capital at a value of US$1 billion.
Of that, Capital A plans to distribute a 47.94% stake in CAPI to shareholders, while Capital A will hold 46.06%. The remaining 6% will be held by existing Aetherium shareholders.
For the balance consideration of US$150 million from the sale, Brand AA will take on a US$150 million term loan currently held by Capital A’s unit, Asia Aviation Capital Ltd (Labuan).
The announcement does not mention a transfer of aircraft leasing unit Fleet Consolidated Pte Ltd to Aetherium, which was part of the initial proposal.
The announcement confirms a newsbreak by The Edge, which reported that the branding management to be listed in the US will involve the transfer of all IP rights across Capital A brands, and not just the AirAsia brand, citing sources.
The announcement also confirms the report in the Feb 19-25 edition of the The Edge Malaysia weekly, which said that parts of the proceeds of the deal, likely in the form of CAPI shares, will be distributed to Capital A shareholders.
The deal will help boost its shareholder equity by RM2.49 billion, a back-of-the-envelope calculation showed. At end-September, Capital A’s negative total equity stood at RM10.53 billion.
It is understood that the gains from the disposal will help Capital A in its road to exit its PN17 status.
Royalty fee for AirAsia brand
Moving forward, CAPI will charge AirAsia Aviation Group Ltd a royalty fee amounting to 1% of revenue from AirAsia’s four airlines in Malaysia, Thailand, Indonesia and the Philippines.
For long-haul carrier AirAsia X, the fee is 0.5%, while Thai AirAsia X will see a higher fee rate of 1.5% of revenue.
CAPI holds IP rights spanning 23 countries, said Capital A in a statement. It has a “stable and recurring revenue stream” from royalty fees, it added.
“The company benefits from access to Capital A's ecosystem, boasting over 50 million users, 22 million loyalty members, and over 56 million social media followers, expanding brand reach and enhancing CAPI’s brand-building capabilities,” it said.
On prospects, Capital A said CAPI would extend the AirAsia brand beyond the travel sector, develop new brands that capitalise on Asean markets, create more IPs and enhance value through partnerships and merchandising, and acquire other Asean-based brands, it added.
Capital A chief executive officer Tan Sri Tony Fernandes, in the statement, said the AirAsia brand evolution “has created a loyal global consumer base”. Capital A is the first Asean-based brand in the travel sector eyeing to expand through licensing, he added.
“AirAsia has transformed from a small Malaysian airline into a leading global aviation and travel brand” valued by Brand Finance at between US$1.01 billion and US$1.31 billion, Fernandes said.
Capital A is building a diversified portfolio spanning aviation, aviation services, logistics, and digital companies in fintech, travel and hospitality, he added.
Fernandes will lead CAPI, whose platform “integrates brand strategy, creative marketing and intellectual property development” to position its brands and cultivate cultural significance among consumers, the statement said.
The transaction is subject to the approval of Aetherium stockholders, and holders of Capital A's redeemable convertible unsecured Islamic debt securities (RCUIDS) holders, among others.
Shares of Capital A closed one sen or 1.38% lower at 71.5 sen on Wednesday, giving it a market capitalisation of RM3.04 billion.