HNA’s Avolon to buy CIT plane-leasing business for US$10 billion

Deal to be completed in the first quarter, and is expected to create the world’s third largest aircraft leasing business

PUBLISHED : Friday, 07 October, 2016, 11:30am
UPDATED : Friday, 07 October, 2016, 10:19pm

Avolon Holdings, the aircraft leasing company owned by China’s shipping-and-airline giant HNA Group, has agreed to buy the aircraft leasing unit of CIT Group for US$10 billion.

When it’s completed in the first quarter of next year, after regulatory and shareholder approval, the transaction will create the world’s third largest aircraft leasing business with Avolon’s fleet expanded to 910 aircraft valued at over US$43 billion, the Ireland headquartered company said.

Avolon was acquired by HNA-controlled Bohai Leasing Co for US$7.6 billion in January.

New York-based CIT is a financial-services holding company, and the leasing operation being bought includes 334 owned and managed aircraft, and 133 aircraft on order or committed,

Avolon will be four times larger following this transaction than it was 10 months ago when it de-listed from the NYSE, under the ownership of Bohai Capital and HNA
Avolon Holdings statement

Avolon will pay US$10.0 billion for US$9.4 billion of net asset value as of 30 Jun 2016, which represents a premium of 6.7 per cent, the company said.

“Avolon will be four times larger following this transaction than it was 10 months ago when it de-listed from the NYSE, under the ownership of Bohai Capital and HNA,” it said in a statement. “Avolon’s stated ambition is now to become the global number 1 in aircraft leasing,”.

Avolon CEO, Dómhnal Slattery, said: “This transaction is strategically compelling and will double the scale of Avolon, but it is not the summit of our ambition.”

The deal doubles HNA’s more than US$10 billion of acquisitions already announced this year, according to data compiled by Bloomberg, and expands its travel and leisure business spanning airports, airlines and hotels.

CIT rose 9.9 per cent to $40 in extended trading at 6.40 pm in New York. The company plans to return as much as US$3.3 billion of common equity to shareholders following the deal.

The HNA Group, which owns China’s fourth largest airline, Hainan Airlines, has been one of the most active cross-border buyers in the aviation, logistics, and real estate sectors in recent years as its chairman, 62-year-old Chen Feng, pushes his ambition to make the HNA one of the top 100 companies in the world by 2020, and a top 50 entity by 2030.

In August, the HNA Group completed the purchase of a stake in Azul Linhas Aereas Brasileiras SA, Brazil’s third-largest airline, after agreeing in May to buy part of Virgin Australia Holdings.

In April, the group agreed to acquire Carlson Hotels, owner of the Radisson and Country Inns & Suites chains. It is also the largest shareholder in Spanish hotelier NH Hotel Group SA as well as Washington-based Red Lion Hotels.

Ahead of the agreement with CIT Group, HNA’s biggest overseas deal in its history had been a US$6 billion bid in February for US technology distributor Ingram Micro. That deal is still pending, according to Dealogic.

HNA posted 2015 revenue of almost 190 billion yuan (US$28 billion) and has about 200,000 employees worldwide, according to its website.

Aviation is a key business for HNA, whose airlines fly more than 800 domestic and international routes with a fleet of 1,250 aircraft as of July.

business-article-page