Business Irish

Saturday 26 May 2018

Avolon likely to decide within a month on $2.6bn bid

Domhnal Slattery. Photo: Bloomberg
Domhnal Slattery. Photo: Bloomberg
John Mulligan

John Mulligan

The board of Dublin-based aircraft leasing firm Avolon is likely to decide by September 14 whether to accept a $2.6bn (€2.3bn) bid for the company.

Speaking to the Irish Independent, chief executive Domhnal Slattery declined to comment specifically on two takeover offers that have been made for Avolon, but said that he wasn't surprised at the interest that's been shown.

Bohai Leasing, majority-controlled by the Chinese state-owned HNA Group, offered to pay $31 a share for Avolon last week, after another suitor, China's sovereign wealth fund China Investment Corp, offered to pay $30 a share.

That $30 a share offer emerged after Bohai initially agreed to buy a 20pc stake in Avolon for $429m. Bohai had agreed to pay $26 per share for that holding.

"We're really humbled that two large investors of this nature are interested in owning the company," said Mr Slattery. "But it's not a surprise to us. It's a very attractive asset, with very powerful earnings."

Avolon released second-quarter results yesterday 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.

Avolon commenced a tender offer last month for in relation to Bohai's agreement to acquire 20pc of the company.

Under the agreement, the shares in Avolon would be sold by existing private equity investors to Bohai. 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.

The tender offer for the shares is due to run until August 27, but can be extended if necessary by Avolon until September 14.

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.

The company also said that it now expects to generate full-year net trading gains of between $60m and $65m, compared to a previous estimate of between $55m and $60m.

Avolon owns and manages a fleet of 152 aircraft, while its ordered, owned and managed fleet size is 260.

The company's clients include airlines around the world, including China Airlines, Ryanair, Aero Mexico and KLM.

Mr Slattery said that while he and his team are mindful of economic events in China, the outlook for the aircraft leasing industry remains strong.

He said that in Iran, for instance, where international sanctions are to be lifted, there are only about 200 ageing commercial airliners in use and no orders in place.

It has a population comparable to that of Turkey, which has almost 500 registered commercial aircraft and orders for about 300 jets.

"This is going to change the demand dynamic dramatically for the next number of years," he said.

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