Waha Capital’s part-owned AerCap finalises $5bn deal for AIG aircraft leasing unit

The transaction will make AerCap an industry leader with in excess of 1,300 aircraft in its fleet.

AerCap has a fleet of 373 aircraft. AFP PHOTO

AerCap Holdings, the New York-listed company in which the Abu Dhabi investment firm Waha Capital has a 26.3 per cent stake, said it had agreed to buy the insurer American International Group’s aircraft leasing business in a deal valued at more than US$5 billion.

Under the terms of the transaction, which will make AerCap an industry leader with in excess of 1,300 aircraft in its fleet, AIG will receive $3bn in cash in addition to 97.56 million AerCap shares for its wholly-owned subsidiary International Lease Finance Corporation (ILFC), Amsterdam-based Aercap yesterday.

AerCap will also assume $21bn of ILFC’s outstanding debt and will seek new finance to fund the cash part of the sale, according to the statement on the company’s website. The combined company will retain the name AerCap with ILFC becoming a wholly-owned subsidiary.

“AerCap’s acquisition of ILFC will create the leading global franchise in the aircraft leasing industry,” said Aengus Kelly, AerCap’s chief executive.

“This transaction presents a unique strategic opportunity to bring together the outstanding and experienced personnel from both companies and two attractive portfolios of modern aircraft on lease to a highly diversified customer base.”

AerCap has a fleet of 373 aircraft and ILFC has about 1,000 planes. They are mostly modern fuel-efficient aircraft such as Airbus A320s and A330s, and Boeing 737NG and Boeing 777s.

The deal, which is expected to be finished by the second quarter of next year, is subject to the approval of AerCap’s shareholders and regulators. Waha Capital has already given its nod for the sale to go through, AerCap said.

Waha acquired an initial 20 per cent stake in Aercap in a 2010 transaction valued at $380 million. The firm’s 29.85 million shares in AerCap are valued at $744.1m, according to the $24.93 closing share price of Friday. Shares of AerCap have advanced 82 per cent this year. Mubadala Development Company, Abu Dhabi’s strategic investment company, owns a 15.4 per cent stake in Waha.

AIG will end up the largest single shareholder of the combined company with about 46 per cent after the transaction, while AerCap’s existing shareholders will own about 54 per cent. AIG will provide AerCap with a five-year $1bn unsecured revolving credit facility and will be allowed to nominate two directors to AerCap’s board under the conditions of the agreement.

The sale to AerCap came about after Hong Kong-based P3 Investments and its partners failed to come up with $4.2bn it was set to pay for an 80 per cent stake in ILFC. The insurer’s sale of its aircraft leasing business comes amid greater regulation of financial services companies, which has led many of them to divest non-core assets.

UBS was the lead financial adviser to AerCap while Goldman Sachs was the sole financial adviser to the company’s board of directors.