Tuesday 12 December 2017

Dublin based aircraft lessor launches $10bn takeover of US rival

LONDON, HEATHROW, UK - OCTOBER 30: Boeing 777 operated by EgyptAir on landing approach to London Heathrow Airport, UK on October 30, 2012
LONDON, HEATHROW, UK - OCTOBER 30: Boeing 777 operated by EgyptAir on landing approach to London Heathrow Airport, UK on October 30, 2012
John Mulligan

John Mulligan

Dublin-based aircraft leasing firm Avolon has sealed a $10bn deal to buy the jet leasing business of CIT Group.

The transaction, which will be completed in the first quarter of next year, will propel Avolon to being the third biggest aircraft lessor in the world, with a total fleet of 910 operational and on-order aircraft. It effectively doubles the size of Avolon.

And in an exclusive interview with this evening, Avolon chief executive Domhnal Slattery said the group now aims to become the world's biggest aircraft lessor.

The ambitious aspiration would see it squeeze pass bigger rivals Gecas and AerCap to claim the title.

Gecas, the world's biggest aircraft lessor, currently has a fleet of just under 2,000 aircraft, including 1,700 fixed-wing jets and 250 rotary aircraft.

Avolon has secured committed debt facilities of $8.5bn to finalise the CIT deal, and saw off stiff competition from rivals such as Century Tokyo Leasing and the leasing arm of China's Ping An Insurance.

Mr Slattery co-founded Avolon in 2010, securing $7bn in private equity backing. The company floated on the New York Stock Exchange in 2014 and was sold to China's Bohai Leasing in 2015. Bohai is part of China's HNA conglomerate.

Mr Slattery said he believed CIT got a fair price for its business.

"I think this has been a win-win transaction for both sides," he said, speaking from New York. "CIT have got a very fair price for their business. They've got a premium relative to their own book value. We think about the metal value of an airplane. While we think about price earning and price to book, they're accounting analyses. We look at what the aircraft are actually worth. We've actually bought this business at a slight discount to the fair value of the aircraft fleet. That feels like a good place to be."

He added that price wasn't the only issue at stake.

"It was very stiff competition. But when you get into these large-scale transactions, price clearly is very important, but I think the board of CIT was very comforted by our track record in executing large deals."

Avolon has paid a $500m deposit for the transaction.

"That's the largest deposit that's ever been paid for a corporate transaction of this size," said Mr Slattery.

He declined to give a timetable for when Avolon hopes to become the world's biggest lessor.

"Our aspiration is to be the largest aircraft leasing company in the world, in terms of size, shape and scale," he said. "We've got plenty of work ahead to get to that. Today, the focus is in getting this one closed. Then we'll see where we go next. We have a track record in continuing to grow. I thought we'd get into the top three within five years of doing the Bohai deal. We did it in nine months. So, who knows? We'll see where the opportunities lie."

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