Airo Group has come together as a growing mid-tier aerospace and defense (A&D) company aiming to fill a void left by the mergers of midsize companies with larger A&D players. The group plans to bring nine companies together under Airo's Project Jupiter after launching with founding companies Airo Drone and AgileDefense. Six other companies are targeted for acquisition under signed letters of intent, including urban air mobility (UAM) vehicle developer VRCO and avionics manufacturer Aspen Avionics, and one company is part of a joint venture.
According to Airo Group CEO Joe Burns, the new company's goal is to target three key growth areas in aerospace and defense: drone technology and UAM; advanced avionics; and defense and training. Plans call for going public with an initial public offering or through the purchase of a special acquisition stock company (SPAC).
'We think the public market value should cross over $1 billion when we're merged into a SPAC or do an IPO,' said Chirinjeev Kathuria, executive chairman of Airo Group. 'There is a void for mid-tier aerospace and defense companies after [recent mergers],' he said. The roll-up of the companies forming Airo Group brings a balanced portfolio of both A&D and high-growth opportunities, he explained. 'Drone services, cargo delivery, adverse-air are all growing, and autonomous UAM technology is very important. We already have this, and it's being integrated into everything we're doing. We have a strong set of advisors, and we can accelerate growth as a public company. I think we're well positioned.'
Two companies are the core of Airo Group and serve the drone detection, remote sensing, and unmanned aircraft systems (UAS) markets (Airo Drone) and aircraft leasing and consulting services to all aviation segments (Agile Defense). The other companies that are joining Airo Group, in addition to Aspen Avionics and VRCO, include Airgility, an unmanned UAS company; Coastal Defense, which provides contract air services and target-simulation services for military organizations; Sky-Watch, a developer, manufacturer, and systems integrator of unmanned aircraft systems; drone-delivery provider Valqari; and Glocal Healthcare, a joint venture with Airo that provides advanced healthcare services.
Airo Group has hired private investment banking firm Stephens, Inc. to raise funds for the Airo Group acquisitions, and the two companies have been working on this effort for the past two years. 'Not only is the market timing right, but the technology being developed in the group is on point,' said Chris Gidden, leader of the global aerospace and defense practice for Stephens. 'Our goal is to bring this to the public market, to leverage the strong sentiment around autonomy, [to make this] a platform for growth and continue to expand.' Gidden also noted that Airo Group's existing contracts in defense markets will help the company grow during the downturn in other sectors.
While the acquisition of Aspen Avionics might raise questions about how a general aviation avionics manufacturer fits into an A&D company, it makes sense in terms of growth opportunities, according to Aspen president and CEO John Uczekaj. 'The general aviation market is still growing, and we have a good position,' he said. But for an independent avionics manufacturer, gaining a presence on new aircraft with original equipment manufacturers (OEMs) is critical, and Aspen has specialized in the retrofit market. 'To attract investment dollars, you have to have growth,' he explained. 'We need investment to create flight controls and integrated avionics. The drone world is helping to attract investors for us to be a true competitor.'
In 2015, Aspen Avionics acquired Accord Technology, which manufactures GPS sensors, and this helps Aspen expand into the drone and UAM markets. 'General aviation is a good, solid business, but not high growth,' Uczekaj said. 'We see all that [drone and UAM technology] as part of the growth cycle, and we want to accelerate that.' The plan is for Aspen to expand beyond its expertise in display manufacturing into other avionics products for the UAM market. 'Airo gives us the platform to grow,' he said.
Burns explained that the Valqari acquisition targets the rapid growth of last-mile package delivery with drones that can land on a target and automatically signal a door to open for secure delivery. 'It's a fascinating prospect,' he said, 'and solves a lot of last-mile issues.'
VRCO, a UK-based UAM developer, is competing with well-financed players such as Joby and Lilium. 'This is an opportunity to develop transportation craft,' said Burns. 'We're working with auto manufacturers to make the flying car of the future.'
Airo's Agility acquisition will also contribute artificial intelligence technology for in-flight autonomous decision-making. This will be useful for tasks such as gas-line leak detection, power-outage monitoring, and other functions, all of which Agility's technology enables in a GPS-denied environment.
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