Business Irish

Sunday 17 December 2017

Dublin-based aircraft leasing firm Avolon takes dramatic step towards accepting €2.3bn takeover offer

Domhnal Slattery. Photo: Bloomberg
Domhnal Slattery. Photo: Bloomberg

Donal O’Donovan

The board of Dublin-based aircraft leasing firm Avolon has taken a dramatic step towards accepting a $2.6bn (€2.3bn) takeover offer just months after floating on the New York Stock Exchange.

In an official statement Avolon confirmed that it has entered into an exclusivity agreement with Bohai Leasing, granting the Chinese firm exclusive rights to negotiate with Avolon until September 7, with respect to the possible acquisition of 100pc of shares in Avolon at a price of US$32 per share.

 During the Exclusivity Period, Bohai and Avolon will look hammer out definitive agreements on terms previously discussed and accepted by the parties, Avolon said. 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. 

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

Bohai had initially agreed to buy a 20pc stake in Avolon for $429m, based on a lower $26 per share price.

"We're really humbled that two large investors of this nature are interested in owning the company," Avolon’s chief executive 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."

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.

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.

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