7-Mar-2023 Source: Kernel Holdings Group
Kernel Group Holdings (NASDAQ: KRNLU) (“Kernel”), a special purpose acquisition company (SPAC) formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, or similar business combination with one or more businesses, announced today that it has entered into a definitive business combination agreement (the “Merger Agreement”) with AIRO Group Holdings, Inc. (“AIRO”), a multi-faceted air mobility, autonomy & aerospace platform with differentiated technologies and capabilities that dynamically address high growth market trends across the entire aviation & aerospace ecosystem. The Merger Agreement provides AIRO with a path to becoming a publicly listed company through a new Delaware holding company, AIRO Group, Inc. (“PubCo”) that will acquire both Kernel and AIRO.
Upon closing of the merger transaction (the “Transaction”), AIRO and Kernel will be wholly-owned subsidiaries of PubCo. PubCo common stock and warrants are expected to be listed on Nasdaq, under the symbols “AIRO” and “AIROW,” respectively.
AIRO’s Executive Chairman and co-founder is Dr. Chirinjeev Kathuria M.D., M.B.A. an entrepreneur, investor, physician, philanthropist, and graduate of Brown University’s School of Medicine, and Stanford University’s Graduate School of Business. Dr. Kathuria has founded and served as Chairman on several publicly traded companies, most recently co-founding Ocean Biomedical which is pursuing programs in oncology, fibrosis, and infectious diseases and listed on NASDAQ in February of 2023. Additionally, Dr. Kathuria was the Founding Director of MirCorp, the first commercial company to privately launch and fund manned space programs
AIRO’s Chief Executive Officer and co-founder is Captain Joe Burns, a thirty-five year veteran of aviation, technology, and communications industries, and has a B.S. and M.B.A. from Miami University. He served as Managing Director of Flight Standards, Managing Director of Technology and Flight Test, and FAA Certificate Director of Operations at United Airlines. Mr. Burns is currently on the U.S. Executive Committee Advisory Board for Position, Navigation, and Timing, a NASA Special Government Employee, and has served in chairmanship roles in multiple national advisory boards
AIRO’s President and Chief Operating Officer, John Uczekaj, has over 40 years of experience in the aerospace industry. While at Honeywell, John was executive vice president and general manager of a $2B revenue Aerospace Electronics Systems division. He led Aspen Avionics from a pre-revenue startup to a successful avionics company that merged with AIRO. Mr. Uczekaj was inducted into the Living Legends of Aviation in 2013. Mr. Uczekaj holds a Bachelor of Science in Electrical and Computer Engineering from Oregon State University and an MBA from City University, Seattle, Washington.
AIRO is positioned to create a new middle market aerospace and defense sector company operating in four key divisions:
AIRO’s four divisions focus on critical elements of the future aerospace and defense market construct that will bring autonomy, artificial intelligence (AI), and advanced operations to mainstream commercial and military marketplaces
AIRO’s Advanced Avionics Division, with its brand Aspen Avionics, has built a strong presence in general and business aviation through its focus on world-class capabilities and a service organization that puts both the current and future needs of its customers first. Building on this experience of certified avionics across numerous platforms, the Advanced Avionics division will lead the industry into the safe, efficient and integrated world of autonomous aviation, and will work cohesively with AIRO’s other three divisions to accelerate certification of Electric Air Mobility solutions for decades to come.
AIRO’s Electric Air Mobility Division is leading with its Jaunt Journey aircraft and is working with Transport Canada towards certification under Chapter 529: Transport Category Rotorcraft. With nearly 300 flight hours and well over 1,000 takeoffs and landings, Jaunt Journey’s Slowed Rotor Compound technology is the safest and quietest eVTOL in certification.
AIRO’s Uncrewed Air Systems Division is leading the global military and civilian drone markets with advanced AI capabilities, autonomous operations, and BVLOS special mission use. With a dual focus on military and civilian applications, AIRO is growing its diversified business through advancements in defensive posture operations, such as its current work in Ukraine, specialized sensor payloads and close-quarter/GPS denied environment work with numerous commercial clients.
AIRO’s Training Division is building on its decades of military and civilian specialized training operations, from ab-initio pilot instruction to adversary air and close air support missions. The Training division will support filling the enormous gaps in civil pilot availability and at the same time, bring a curriculum that bridges the divide between uncrewed, minimally crewed, and crewed aviation.
AIRO’s Executive Chairman, Dr. Chirinjeev Kathuria remarks, “The attractiveness of AIRO is based on four key factors; 1) the strength of the brands and existing orders and contracts, 2) a diversified yet synergistic portfolio that is already proving its robustness with AIRO’s support of drone technologies in Ukraine, 3) a training division that is participating in the $6.40 billion U.S. D.O.D. contract program to provide Close Air Support, Intelligence, Reconnaissance, Surveillance and Adversary Air training, which will drive significant revenue and profit growth, and 4) a management team with significant experience and global successes that span an evolving defense and aerospace marketplace that’s changed significantly over the last four decades.”
“Operators are looking for a pedigree of certification and safety as well as robust, dynamic capabilities, efficiencies, and quiet operations,” says AIRO CEO, Joe Burns. “AIRO is proud to have received numerous pre-order commitments as well as multiple US DoD contracts aimed at optimizing eVTOL speed and minimizing acoustic signatures for quiet operations. Aircraft certification is driven out of AIRO’s Electric Mobility Office in Montreal, and the certification will be validated through the Federal Aviation Administration (FAA) and European Aviation Safety Authority (EASA) shortly thereafter.”
Suren Ajjarapu, Chairman and CEO of Kernel states “AIRO leverages decades of industry expertise across the drone services, aviation, and avionics markets to offer a sector-leading enterprise providing innovative aerospace, urban air mobility, and UAS products and services. We think that the combination will result in positive valuations and long term growth, as we build the leading mid-market publicly traded aerospace and defense company.”
Following the closing of the proposed transaction, Dr. Chirinjeev Kathuria will serve as the Chairman of the Board of Directors. The Board will consist of nine members including Joe Burns, John Uczekaj, Suren Ajjarapu, and Michael Peterson (current member of the Kernel Board of Directors.)
The proposed Transaction was unanimously approved by the boards of directors of all parties, at an expected combined pro forma enterprise value of approximately $847 million, assuming no redemptions of current Kernel public stockholders. Prior to entering into the Merger Agreement, Kernel signed an agreement for an up to 7.7 million share backstop with Meteora. At the closing of the transaction, Kernel security holders will receive equivalent securities in PubCo in exchange for their Kernel securities, and both Kernel and AIRO will become wholly-owned subsidiaries of PubCo. Additionally, the proposed Transaction includes a contingent earnout payable to the AIRO stockholders and the sponsor. The proposed Transaction is expected to be completed in Q3 2023, subject to, among other things, the approval by Kernel stockholders, governmental, regulatory and third party approvals, satisfaction of minimum closing net tangible asset and cash requirements and the satisfaction or waiver of other customary closing conditions.
Citibank and Cohen & Company Capital Markets, a division of J.V.B. Financial Group, LLC are serving as lead capital markets advisors to Kernel. Nelson Mullins Riley & Scarborough LLP is serving as legal counsel to Kernel and PubCo. and Malone Bailey, LLP is serving as auditors to Kernel. Dykema Gossett PLLC is serving as legal counsel to AIRO and BPM LLP is serving as auditors to AIRO.