Cerberus Capital Management has focused on driving operating improvements in its portfolio companies, with financing conditions and the IPO market a different proposition to just 12 months ago. In the case of Worldwide Flight Services (WFS) – which the firm exited in early April – the strategy involved a change of course to e-commerce and pharmaceutical cargo, Craig Brooks, senior managing director at Cerberus, told PE Hub Europe.
That approach is far from unique – last month, Gabriel Caillaux, head of EMEA at General Atlantic, told PE Hub Europe about how his firm had doubled down on existing investments over the last year, for instance. But far more rare was the nature of New York-headquartered Cerberus’ investment in WFS – an air cargo logistics operator, which it agreed to buy from fellow private equity firm Platinum Equity in June 2018, about a year and a half before global air travel shut down in the face of the covid pandemic.
“Covid had an unprecedented impact on the aviation industry,” said Brooks. “WFS’s business was less impacted because most of its revenues are from air cargo logistics. Also, during covid, WFS pivoted to serving more freighters, which were not subject to the passenger flight restrictions and growth segments of cargo, including e-commerce and pharmaceuticals carried by air. Covid was an opportunity to accelerate our strategy in these growth areas.”
Organisations such as the International Air Transport Association have highlighted growth in the transport of pharma products by air, which WFS sought to take advantage of.
“Industry participants such as WFS are investing in the capabilities to handle pharma globally,” said Brooks. “You also have to be compliant to handle such cargo. We invested in cold storage and those capabilities really didn’t exist in the air cargo sector. It’s high-value, time-sensitive, so it makes sense for a segment of pharma to travel by air.”
Revenue figures suggest the strategy was the right one, when coupled with a push to penetrate North America, which was growing faster than Europe – where WFS has its Paris headquarters – and to pivot away from the lower-value ground handling business.
When Cerberus, which has $60 billion in assets across credit, private equity, and real estate strategies, bought WFS for an enterprise value of €1.2 billion, the firm had €1.2 billion of revenues. Those had risen to €2 billion when Cerberus completed its sale in early April to Singapore’s SATS for an enterprise value of €2.25 billion.
The combination with SATS, a provider of food and gateway services, was complementary, according to Brooks, building upon the company’s presence in Europe and the Americas, which it serves via its regional headquarters in Dallas, Texas. The firm had also started to make inroads in countries including India.
“WFS is the leading air cargo logistics provider with a network of stations in Europe and the Americas, and has started to grow in Asia,” he said. “SATS is the leader in Asia, so combining these two businesses has created a unique global platform with a network of stations across the Americas, Europe and APAC that doesn’t exist elsewhere.”
“WFS is one of the few players with a global presence,” said Brooks. “We standardised our operations across stations so that customers think of WFS as the same business globally. Benefits to customers include one form of customer contract and a consistent service offering across the stations around safety and security.
“A critical part of this industry is having a network of cargo handling stations that results in better service to global customers that seek consistent service across their own network.”