Jazz Air Income Fund has agreed to invest $15 million in Latin American Regional Aviation Holding Corp. ('LARAH') in return for a 33.33% non-voting equity interest in the company.
Jazz says the required funding for the investment is provided through general working capital.
As part of the transaction a Jazz representative will be appointed to the 7 member board of directors of Pluna.
The completion of Jazz's investment is subject to a number of closing conditions, including certain conditions relating to actions to be taken by the Government of Uruguay in connection with Jazz's investment. At the time of closing of Jazz's investment, LARAH will hold an indirect 75% equity interest in Pluna Lineas Aéreas Uruguayas S.A. The remaining 25% equity interest in Pluna is held, indirectly, by the Government of Uruguay.
"This investment provides the potential for significant returns for Jazz," says Joseph Randell, President and CEO Jazz Air LP. "The South American air travel market is one of the world's fastest growing and this investment provides Jazz with an exciting opportunity to participate in that growth. We chose to invest in Pluna because we see the value and opportunity in the niche markets they serve, and we believe they have a solid business plan."
Jazz and Pluna have a common fleet type in the CRJ705/900 series regional aircraft.
"Jazz has spent the last three years seriously considering and evaluating opportunities for diversification and growth, and we believe this transaction is another solid step in this direction," continued Randell. "Our recently announced new partnership with Thomas Cook Canada and the future addition of new Q400 NextGen turboprops that we'll fly on behalf of Air Canada, were the initial steps taken to broaden our horizons."
The $15 million investment, together with an additional $5 million which the Government of Uruguay has agreed to invest, will be used by Pluna to complete the business restructuring and to fund growth.
"We are very excited about this new partnership with Jazz," said Pluna's CEO Matias Campiani. "Not only will this investment facilitate our growth plans, we believe that Jazz's operational expertise and experience will enable Pluna to realize upon synergies that will strengthen our business."