Thursday 8 December 2016

Avolon eyes China after $429m stake sale

Published 15/07/2015 | 02:30

Co-founded by Domhnal Slattery, Avolon has a fleet of 153 owned and managed aircraft, with 107 more on order from Boeing
Co-founded by Domhnal Slattery, Avolon has a fleet of 153 owned and managed aircraft, with 107 more on order from Boeing

Irish aircraft-leasing firm Avolon - which is headed by Domhnal Slattery - has significantly bolstered its presence in Asia after agreeing to sell a 20pc stake in the business to Chinese firm Bohai Leasing for $429m (€399m).

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The sale - which is likely to be completed within weeks - comes just seven months after Dublin-headquartered Avolon floated on the New York Stock Exchange. The shares will be sold by existing private equity investors in Avolon.

Bohai Leasing, listed on the Shenzhen Stock Exchange, is majority-controlled by the Chinese state-owned HNA Group. HNA has major interests in aviation, tourism, retail and finance sectors.

Co-founded by Mr Slattery, Avolon chief financial officer Andy Cronin and chief commercial officer John Higgins in 2010, Avolon has a fleet of 153 owned and managed aircraft, with another 107 on order from Boeing and Airbus.

Its airline clients include China Airlines, AeroMexico, KLM and Japan Airlines. It has a market capitalisation of just over $2bn (€1.8bn).

Since its foundation, Avolon has secured more than $7bn in backing from private equity firms and banks, including Cinven and CVC, and Oak Hill Capital Partners. Venture capital and private equity firms currently own about 37pc of Avolon.

Under the terms of the deal, Bohia will be restricted from acquiring additional shares in Avolon for the next two years without the permission of the Irish firm's board, and it can't increase its ownership in Avolon beyond 30pc.

Mr Slattery said the acquisition by Bohia, at a premium to Avolon's share price, "reflects their confidence in the sector, the attractiveness of the Avolon investment case and the strength of our global franchise".

Bohai will also be able to nominate a non-executive director to the Avolon board.

Analysts welcomed the deal, pointing out that it would improve Avolon's exposure in China.

But Andrew Light at Citi pointed out that Bohia already has its own aircraft-leasing interests. It owns Hong Kong Aviation Capital (HKAC), which it bought in 2012, and which also has offices in Dublin.

The Irish capital is a global hub for the international aircraft-leasing business.

HKAC has a portfolio of 73 aircraft on lease of airlines around the world, with a bias towards Asia. It has outstanding orders for 70 Airbus A320 neo aircraft.

Analysts at Cowen and Company noted that there aren't enough aircraft on order to satisfy future demand in China.

"According to a number of lessors, including Avolon, the Chinese airlines haven't ordered enough aircraft to handle the expected demand over the next decade," they said.

"Avolon has a robust order book and the Bohai relationship can help place some of those aircraft into Chinese airlines."

Irish Independent

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