Business Irish

Friday 23 August 2019

SMBC chief refuses to rule out potential bid for $25bn Gecas

Peter Barrett, SMBC Aviation Capital CEO. Photo: David Conachy
Peter Barrett, SMBC Aviation Capital CEO. Photo: David Conachy
John Mulligan

John Mulligan

Peter Barrett, the CEO of the world's fourth-largest aircraft lessor, Dublin-based SMBC Aviation Capital, hasn't ruled out sizing up its larger rival Gecas if the business is put up for sale by General Electric.

But Mr Barrett, pictured, has cautioned that people are "getting ahead of themselves" as new GE chief executive, John Flannery considers divesting assets in order to revitalise the group.

Gecas, which has a base in Shannon, has received a number of expressions of interest from rivals. GE has reportedly been considering a sale or spin-off of the leasing unit, which has $25bn in assets.

But Mr Barrett warned that it was premature to speculate about what might happen to Gecas, which is the world's largest lessor by fleet size.

It has a total of 1,970 in-operation aircraft and aircraft on order. Of that total, 1,700 are jets and the remainder helicopters.

"I do think perhaps that people are getting a little bit ahead of themselves on this whole story," he told the Irish Independent.

"We'll always consider whatever opportunities come through the market. We'll base our analysis on transactions that are actually there in front of us at the time.

"We've looked at pretty much every deal that has come along and I don't think it's going to change in the future."

SMBC has aircraft assets of $10.5bn (€8.9bn), including 278 owned, and 174 managed aircraft. It also has commitments to buy about 216 aircraft.

"Our ambition is clearly stated," added Mr Barrett. "We want to be the leading aircraft leasing company in the world. Size is one of those dimensions, but certainly not the only one. Size for size's sake is not something that we're going to pursue. We're the fourth-largest leasing company in the world. Maintaining a leading position is important to us, but not at any cost."

Mr Barrett said that the aircraft leasing business is a "long game", and that SMBC's Japanese owners - Sumitomo Mitsui Financial Group, and Sumitomo Corporation - are supportive and dedicated to SMBC in that. Last week, SMBC said its owners had committed $1bn in new capital to the aircraft leasing company, with the funds being injected from March 2019 to help fund new jet orders.

"We will continue to grow our business in a prudent and sensible way," added Mr Barrett.

"Whatever the opportunities that allow us to do that might be, we'll take them," he said. "If we see value in the M&A market, if we see value in the sale and leaseback market, or the trading market, then we'll try and take those opportunities. That's how we'll grow our business. We've been doing that successfully for a long time, in good times and in bad times."

Rivals including Dublin-based Avolon, co-founded by Domhnal Slattery, are also certain to weigh any possible sale of Gecas, which has its roots in Tony Ryan's Guinness Peat Aviation.

Avolon was acquired by China's Bohai Leasing in 2016. Bohai is part of Chinese conglomerate HNA.

Earlier this year, Avolon acquired the aircraft leasing assets of CIT for almost $11bn.

That deal propelled Avolon to being the world's third largest aircraft lessor after AerCap, which is also headquartered in Dublin and headed by Gus Kelly, and Gecas. AerCap had 1,506 owned, managed or on-order aircraft in its portfolio at the end of September.

Mr Slattery has made no secret of Avolon's desire to be the world's largest lessor and said Avolon would be willing to achieve that via another big acquisition.

Mr Barrett was speaking yesterday in Dublin as SMBC reported a pre-tax profit of $167m (€142m) in the first half of its financial year. That was up 3.1pc year-on-year. Revenue and other income hit $566m (€481m) in the first half.

SMBC sold 13 owned aircraft during the period, but its first-half performance was driven by strong leasing activity.

Irish Independent

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