China’s Bohai Leasing Co (渤海租賃) is to buy Irish jet lessor Avolon Holdings Ltd for US$7.6 billion, according to a statement, as Beijing pushes its companies to search overseas for future growth.
Bohai, a subsidiary of HNA Group (海航集團), which operates Hainan Airlines, is to pay US$31 per share for New York-listed Avolon, a 31 percent premium to its closing price on July 13, the day before Bohai’s interest in a deal was formally announced, Avolon said in a statement on Thursday.
“Avolon has delivered remarkable growth over the past five years to become a leading industry franchise with a distinct business model, and the company is a strong complement to our existing investment in the aircraft leasing sector,” Bohai CEO Chris Jin (金川) said in a statement.
“Our vision at Bohai is to build each of our transportation finance businesses into global leaders,” he said.
Bohai offers aircraft, ships, engineering equipment and other items for lease.
It is the second acquisition by HNA Group or its subsidiaries this week, after the parent company announced it had bought an office building at London’s Canary Wharf housing, the European headquarters for global news agency Thomson Reuters. It gave no value for the deal, but said it marked its first “major” acquisition in the UK capital.
China has encouraged its companies to “go out” and make acquisitions to gain both market access and international experience, while at the same time seeking oil and other raw materials to keep the world’s second-largest economy moving.
At the same time the plunging euro has made eurozone assets cheaper for outside buyers.
Avolon has a fleet of 260 aircraft serving 56 customers and its chairman Denis Nayden said the merger would offer greater exposure to the Chinese market, calling it “one of the most compelling growth opportunities in global aviation over the next two decades.”
The Dublin-based jet lessor’s private-equity backers include Oak Hill Capital Partners, CVC Capital Partners and Cinven Ltd.
The transaction is expected to close by the first quarter of next year.
Asian leasing companies are boosting fleets and expanding across the continent, which is set to overtake the US as the world’s largest plane market in two decades. Economic growth in China, India and Southeast Asia is encouraging more air travel. Hong Kong billionaire Li Ka-shing (李嘉誠) and Malaysian low-fare carrier AirAsia Bhd also entered the aircraft-leasing market last year.
Shares in Bohai, which is listed on China’s Shenzhen exchange, closed down 1.45 percent at 6.82 yuan on Wednesday, the last day of trading this week before a market holiday, while Avolon shares rose 0.4 percent to US$28.68 on Thursday in US trading.
Additional reporting by Bloomberg
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