Avolon takeover bid 50pc above last December's IPO pricing
Irish aircraft leasing giant Avolon is in exclusive talks to sell itself just eight months after listing on the New York Stock Exchange.
The talks take the board of Dublin-based Avolon dramatically closer to accepting a $32-a -share takeover offer from China's Bohai Leasing that values the stock at $2.64bn (€2.39bn), giving the company an enterprise value - which includes debts - of $7.6bn (€6.8bn).
The offer price is up more than 50pc since Avolon, headed by Clare man Domhnal Slattery, floated on the markets back in December at $20 a share.
It is $1 a share higher than an earlier Bohai offer for a 20pc stake in Avolon made in July, and $2 above an approach for Avolon made by an unnamed third party bidder.
Yesterday, in an official statement, Avolon confirmed that it has entered into an exclusivity agreement with Bohai Leasing, granting the Chinese firm the sole right to negotiate with Avolon until September 7.
The deal would give Bohai 100pc ownership of the world's 11th-largest aircraft lessor.
Shares in Avolon rose by 4.8pc to $30.13 each after the news hit the market.
As a sign of good faith, Bohai will pay a $50m deposit in the next two days, in addition to a previous $25m deposit paid as part of an earlier bid for a stake in Avolon.
The new offer also includes a break fee of up to $250m that will be paid to the Irish firm if a takeover deal does not go ahead.
During the Exclusivity Period, Bohai and Avolon will look to hammer out definitive agreements on terms previously discussed and accepted by the parties, Avolon said.
Bohai had initially agreed to buy a 20pc stake in Avolon for $429m, based on a lower $26 per share price but was prodded to launch a full takeover bid after a rival buyer entered the fray.
Bohai Leasing is majority-controlled by the Chinese state-owned transport conglomerate HNA Group. Avolon last week released second-quarter results that beat analyst expectations.
Its net income for the period jumped 133pc to $56m, while lease revenue rose 30.9pc to $161.1m. Adjusted earnings per share for the quarter were 75 cent, compared to analyst expectations of 71 cent.
Aviation leasing has emerged as a major industry in Ireland since the creation of the former Guinness Peat Aviation (GPA) 40 years ago, with around half of all lessor-owned aircraft controlled by Ireland-based firms.
Over the past year in particular Chinese lessors, mostly backed by state-owned banks, have been on the acquisition trail as large carriers such as Hainan Airlines, Air China, China Eastern Airlines and China Southern Airlines open more routes at home and overseas.
Avolon, which was founded by leasing entrepreneurs Domhnal Slattery and John Higgins in 2010, was floated last December. Ahead of Avolon's flotation, China Investment Corp (CIC) and AVIC Capital had been in talks to acquire it.
Avolon owns and manages a fleet of 152 aircraft, while its ordered, owned and managed fleet size is 260.
Client airlines around the world include China Airlines, Ryanair, Aero Mexico and KLM.
After its results last week Domhnal Slattery said that while he and his team are mindful of economic events in China, the outlook for the aircraft leasing industry remains strong.
Mr Slattery said Avolon's performance during the second quarter had been driven by lower debt costs, and also by increased lease income as its fleet expands.
He was not surprised at the takeover interest, he said.
"We're really humbled that two large investors of this nature are interested in owning the company," Domhnal Slattery told the Irish Independent last week. But it's not a surprise to us. It's a very attractive asset, with very powerful earnings." (Additional reporting Reuters)