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New Asian owners injecting cash into Piper Aircraft
BY IAN M. LOVE - MANAGING EDITOR (Week of May 21, 2009)

The new Asian owners of Piper Aircraft plan to make an initial infusion of cash into the Vero Beach airplane manufacturer in the next few weeks, insuring that the company can stay on schedule with development of the PiperJet while redoubling Piper’s efforts to emerge from the current general aviation recession stronger than ever, according to a representative of the investors.

Stephen Berger, managing partner of Imprimis, an investment company which purchased Piper on May 1 on behalf of the Brunei Ministry of Finance, outlined the new ownership’s plans and goals for this area’s largest employer in a wide-ranging email interview from his office in Singapore.

“When Imprimis made the decision to purchase Piper, we also made a commitment to provide the capital needed by the company to bring the PiperJet into commercial production,” Berger said. “This is a significant follow- on investment that will be disbursed over the coming months and years. The first such contribution of new capital will take place in the coming weeks.

“I think it is fair to say that we have every expectation for the PiperJet program to be completed on time and on budget, and we are prepared to provide the capital to help achieve that goal,” he said.

Before Imprimis entered the picture, Piper was funding research and development for the PiperJet –expected to cost some $100 million – from cash flow and deposits placed on orders for its first foray into the very light jet market. The severe downturn in the general aviation market was pinching both sources of R&D dollars.

“We are pleased to note that since Imprimis’ purchase of Piper, orders for the Piper Jet, and the deposits taken, have increased,” Berger said. “That is a pretty remarkable achievement by Piper in these tough market conditions.”

Company officials would not say how much Imprimis money is expected to make its way to Florida in June, but said it was “significant” and would be used operationally for more than the PiperJet.

They also stated that while the cash infusion is welcome, it does not necessarily mean Piper is yet in a position to hire back Vero Beach employees laid off over the last six months. That decision will await an uptick in the economy that gets the general aviation market on the move again, they said. In fact, just this week, Piper told employees it was extending its furlough program to include two weeks in July and one week each month thereafter through the end of the year.

Just the same, the simple fact Imprimis, which oversees $210 million of Brunei’s money, will be investing in Piper rather than waiting for aviation industry conditions to improve bodes well for the company and can only be viewed as good news in the long run for Vero Beach.

Berger also reaffirmed the new owner’s commitment to keeping Piper in Vero Beach. In the wake of last year’s acrimonious debate over the deal to provide millions in taxpayer incentives to remain and build the PiperJet here, there has been some speculation in the wake of the Imprimis deal that the masterplan might call for moving Piper’s headquarters to Asia.

However, Berger said that will not be the case and, in fact, he said he expects the Vero Beach operation to grow along with the company’s share of the U.S. and South American general aviation markets.

“When we announced the transaction, we also announced that we are committed to keeping Piper’s headquarters, production and product development in Vero Beach,” Berger said. “Nothing has changed since then. Of course, as part of developing the international presence and activities of Piper we may seek to expand in other places, including in Brunei, but this should not come at the expense of Vero Beach.”

But Berger left no doubt that Imprimis has a global vision for Piper which involves creation of a general aviation industry in Asia where presently none exists.

“Our strategy for Piper is to grow its international activities, especially in Asia where we believe the market for general aviation activities is at a low base but will grow significantly,” Berger said.

“We believe that Brunei has significant under-utilized aviation resources that can be brought to bear for the benefit of Piper’s Asian operations and that the government of Brunei can prove a valuable sponsor for Piper as it seeks to penetrate foreign markets, especially in Asia.

“We have considered and are prepared to make additional investments in other aviation-related companies, especially those that have operations which we feel would contribute to the ability of Piper to develop its activities in Asia.

“We think that there is a real win-win for Brunei and Vero Beach. Vero is, and will be, the headquarters of Piper and the base for its product development and production activities, while Brunei will be the base for the company’s Asian operations as and when they are developed,” he added.

Berger, who was raised in Philadelphia and earned his Bachelor of Arts from Dartmouth and a Masters from Trinity College at Cambridge University, also explained the structure of the new ownership, and how it ultimately came to purchase Piper.

“Imprimis is the manager of an investment company called the Imprimis Strategic Investment Corporation (NBD) Sdn Bhd (or ISIC),” he said. “ISIC enjoys a capital commitment of $210 million from the Brunei Ministry of Finance.

“The mandate that ISIC holds from the Ministry of Finance of Brunei is to make investments that can contribute to the diversification of the Brunei economy away from its core oil and gas activities. In this regard, ISIC seeks to invest into well run enterprises that through their operating expertise can contribute to the employment base, growth and diversification of the Brunei economy.

“During the course of our negotiations to acquire Piper, we held numerous meetings with the management team to explain the strategic mandate of ISIC and our proposal to the management boiled down to the following: Can Piper seek to build an Asian business from a base of operations in Brunei?

“In order to assess this challenge, there were many visits from Imprimis to Vero and by the Piper management team to Brunei during the months of our negotiations. In the end, the management of Piper felt this was a challenge they could embrace, and we are now in a planning process to determine exactly how this will be executed. This planning will take place over the next 6 to 12 months and will be implemented thereafter.

“We evaluated a number of other candidates before selecting Piper. Our selection of Piper came down to the company’s management. The leadership team at Piper is highly talented and experienced, and their bench is deep.

“We especially like the fact that they operate well as a team and in our view they have the capacity to lead and manage a larger enterprise than what Piper is today. We intend to support them in achieving that goal which will involve growth in both their core home market here in the USA but also in our focus area in Asia.”

Mac McClellan, editor of industry standard Flying magazine, points out that Piper may be unique fit in helping to build the infrastructure for the general aviation market in Asia. As that market grows, pilots will need to be trained and planes will have to be built to train them, and as the market matures, so will the range of personal aircraft pilots will seek.

“I am convinced there is a market for single-engine jets, and the PiperJet promises to be competitive so long as its development is funded and given the time it takes to mature,” McClellan wrote in an editorial. (read McClellan’s editorial at end of article.)

The only area where Berger proved reticent in our interview was on the purchase price. He declined to disclose how much Imprimis paid for Piper.

“Imprimis’ purchase of Piper was a private transaction and the purchase price will remain confidential due to competitive reasons,” Berger said. “What we can say is that Imprimis paid a fair price for a great company.

“The transaction was financed entirely by equity funds under the management of Imprimis and did not involve either Piper or Imprimis taking on any debt. As you know Piper was almost debt free at the time of the acquisition by Imprimis, and we think that is the right balance sheet model for the current economic environment.”

He did say however, that because of the price, Imprimis had to strike a deal directly with the Brunei Foreign Ministry as well as using ISIC funds.

“The investment into Piper was the first that ISIC has made,” Berger said. “Because the Piper investment exceeded the transaction limits that we impose on ISIC, we asked for and obtained a separate co-investment commitment from the Ministry of Finance in order to complete the transaction. This co-investment is outside of the $210 million capitalization of ISIC and is also managed by Imprimis. Therefore, it is correct to state that the entire capital for the purchase of Piper was sourced from the Ministry of Finance of Brunei.”

But while most Vero residents may only have a marginal idea what Brunei is or where it is located (and the reverse is probably at least equally true for residents of Brunei), Berger expressed hope that may soon change.

“Brunei and Vero Beach have a lot in common,” he said. “Both have a smalltown feel (Brunei has a total population of around 370,000) and both are pretty wealthy spots compared to their neighbors.

Both locations enjoy warm weather as well as beautiful golf courses and beaches. In the future, we hope both Vero Beach and Brunei will become even more prominent in aviation circles.”

J. Mac McClellan’s editorial
Piper finally finds a little love

It’s been a long time since Piper had owners who really wanted to be in the airplane business, but that appears to have changed now that it has been purchased by Imprimis.

This investment firm from Asia Pacific admires Piper’s long history, its lineup of models, its track record of international success and its new developments. Imprimis sees a future for Piper and general aviation, not just an investment opportunity.

In the United States we take for granted our general aviation system with reliable manufacturers who deliver excellent airplanes, along with a network of airports, FBOs and flight schools to support all types of flying. No country can match the U.S. aviation infrastructure, and most are in the early stages of establishing a workable system.

Everyone expects rapid aviation growth in Asia because the area is starting almost from scratch. And that’s where Imprimis can put Piper’s strengths to work.

Before an aviation economy can run, it has to walk. And that means trainers and flight schools to create pilots. Piper has a proven and efficient lineup of trainers. When it comes to building airplanes you don’t start with large jets, but basic models such as the Cherokee family. The same for building a support network.

Imprimis can propel Piper into a dominate aviation force over a big chunk of Asia Pacific while continuing to provide the financial support, and time, that it takes to keep Piper competitive in the established aviation markets.

I am convinced there is a market for single-engine jets, and the PiperJet promises to be competitive so long as its development is funded and given the time it takes to mature. The sales success of the Matrix again demonstrated the strength of the PA-46 family with the Meridian leading the way. And the Cherokee family of basic piston airplanes are proven winners in flight training.

I have lost count of how many times Piper has changed owners since the founding family, or in what order those owners came and went, but it seemed that each new buyer saw it as little more than a glamorous widget maker that may make a quick buck.

Like the prophet who is ignored in his own land, Piper is not fully appreciated here, but in an area like Brunei and the rest of Asia Pacific that is building an aviation industry from the bottom up, it’s possible to see Piper for what it is – a company of great and proven capabilities that can provide a solid foundation for growth.

(Editor’s Note: J. Mac McClellan, editor of Flying magazine, is one of the world’s top aviation writers and has reported on the aviation industry for more than 30 years. This editorial appeared in the electronic edition of Flying magazine.)