Air Methods buys Rocky Mountain

 - April 18, 2008, 11:00 AM

The inexorable “bigger is better” economic logic of consolidation that has reshaped much of the fixed-wing side of aviation is now beginning to emerge in the rotary-wing world as well. In what has been one of the helicopter industry’s worst-kept secrets in recent months, publicly held aeromed transport leader Air Methods has agreed to purchase 100 percent of Rocky Mountain Holdings (RMH), operator of Rocky Mountain Helicopters, itself one of the largest aeromed transport operations in America.

The deal calls for a cash purchase price of $28 million, due at closing. Air Methods plans to finance the deal via issuance of a combination of senior and unsecured subordinated notes to a third party. An additional $2.6 million in possible earn-out provisions would also be payable over the next few years. Closing details were still being worked out at press time, with final closure of the deal anticipated as early as August 31 but no later than October 31.

Combining the aeromedical operations of the two companies would result in an aeromed super-operator with bases in 31 states and fielding a fleet of 136 helicopters and 19 fixed-wing aircraft. Headquartered in Provo, Utah, RMH has a significant maintenance and overhaul facility in that city, as well as in Greenville, N.C. RMH also maintains a national dispatch and communications center in Omaha, Neb. Those assets are also part of the deal. Audited financial results for RMH’s last fiscal year (ended last December 31) reflect a net income of $2.6 million from revenues of $8 million.

The RMH buyout marks another triumph for Air Methods, which has enjoyed unprecedented growth over the past three years, a time in which revenues have mounted at an average 25 percent annually, to $98.4 million, and profits have grown by 169 percent, currently standing at $7.7 million. Aside from its chain of aeromed operations, Air Methods clinched a potential $200 million deal with the U.S. Army calling for quick-change aeromed kits for its fleet of UH-60 Black Hawks. These kits can transform a Black Hawk cabin into an aeromed intensive-care unit in what Air Methods claims is just minutes.

The other key to Air Methods’ nationwide growth strategy could be likened to the hub-and-spoke concept favored by the airlines. Traditionally, Air Methods buys competitors within a given region, then ties them together in a regional network of outlying clinics and major city hospitals. It provides a vertically integrated package to the client, often a group of hospitals with varying specialties. This cooperative approach cuts costs and makes the most out of such capital-intensive resources as helicopters.