Chinese make $2.2bn bid for Dublin aircraft lessor AWAS
Published 19/03/2016 | 02:30
Private equity firm Terra Firma has rejected two bids worth up to $2.2bn (€1.9bn) from a Chinese company for Dublin-based aircraft leasing group AWAS.
The offers were made by Bohai Leasing, a unit of China's State-owned HNA Group. Bohai Leasing completed a $2.6bn acquisition of Dublin-based aircraft leasing firm Avolon in January. The enterprise value of that deal was $7.6bn.
The first bid by Bohai, made late last year, valued AWAS in line with the underlying book value of its fleet, which is around $2bn, excluding jets earmarked for sale, according to a source.
A second, relatively recent bid, upped the value of the offer to reflect a roughly 10pc premium to book value, the source said. The total deal value, including debt, would be over $7bn.
A spokesperson for China's HNA Group denied any knowledge of the bids. Terra Firma and AWAS declined to comment.
Aviation assets are also attracting investors such as insurers and pension funds hungry for long-term, dollar-based revenues and solid returns while interest rates remain low.
The fast-growing largely Dublin-based aircraft leasing industry has also seen growing consolidation, led by interest from Asia as the industry finances record aircraft orders.
Chinese lessors, mostly backed by state-owned banks, have been expanding as China's major airlines open more routes.
Avolon was co-founded by Clare native Domhnal Slattery, and its HQ has have been maintained in Dublin following its acquisition. Other aircraft leasing firms with bases in Dublin include AerCap. Headed by Aengus Kelly, it recently completed moving its corporate HQ from Amsterdam to Ireland.
It and rival GECAS, part of General Electric, are the world's biggest aircraft-leasing firms.
HNA Group aims to use Avolon as a starting point to try to break into the aircraft leasing industry's top three.
A European banker said "aircraft leasing is a business where size matters" and that HNA had long been thought to be interested in expanding Avolon.
In an interview with the Irish Independent this year, Mr Kelly said it would be difficult - but not impossible - for anyone else to challenge the dominance of AerCap and GECAS. AerCap has a managed fleet of about 1,700 aircraft, compared to Avolon's 220 owned and managed planes (it has another 183 on order).
"To challenge us or GECAS - what's that, six or seven Avolons - it's very tough," Mr Kelly said.
The current third-largest airplane lessor, Dublin-based SMBC Aviation Capital, has also been reported to be interested in AWAS. The Japanese-owned company declined to comment.
AWAS has expanded considerably since early days as the leasing arm of now defunct Australian airline Ansett. It has a fleet of 257 airplanes.
Terra Firma, run by British financier Guy Hands, bought 75pc of AWAS from Morgan Stanley in 2006 in a deal worth $2.5bn.
A year later it acquired rival Pegasus for $5.2bn, merging the groups to create what was then the world's third-largest plane lessor. (Reuters)
1985: Ansett Worldwide Aviation Services formed in Australia as JV between TNT and News Corporation
2000: US investment bank Morgan Stanley Dean Witter buys the lessor.
2004: The company is rebranded as AWAS.
2006: Terra Firma buys AWAS and moves its headquarters to Dublin.
2007: AWAS acquires Pegasus Aviation and combines the businesses.
2014: Terra Firma explores possible sale of the business.
2015: Celebrates 30 years in business. Bohai Leasing makes first takeover approach.