Chinese leasing company Bohai will pay $31 per common share in New York-listed Avolon, a 31% premium to its closing price on July 13.
AFP/Beijing
Chinese leasing company Bohai will buy Irish jet lessor Avolon in a deal which values the company at $7.6bn, according to a statement, as Beijing pushes its companies to search overseas for future growth.
Bohai Leasing Co will pay $31 per common share in New York-listed Avolon, a 31% premium to its closing price on July 13, the day before Bohai’s interest in a deal was formally announced, Avolon said in the statement on Thursday.
The transaction implies a total enterprise value of $7.6bn, it said. Its current market capitalisation implies equity of about $2.5bn at $31 per share, according to figures on its website, which also says it has around $5.1bn in debt.
“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 said in the statement. “Our vision at Bohai is to build each of our transportation finance businesses into global leaders,” he said.
Bohai – a subsidiary of HNA Group which operates Hainan Airlines – 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 British 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”.
But the deal comes as Chinese growth slows, which could cut into air travel by Chinese citizens both domestically and overseas.
China’s economy expanded 7% in each of the first two quarters, slowing from a 7.4% growth last year, which was its weakest since 1990. Still, US aircraft maker Boeing last month forecast the country will need 6,330 new planes over the next 20 years, valuing them at $950bn, based on demand from international expansion and budget carriers.
Shares in Bohai, which is listed on China’s Shenzhen exchange, closed down 1.45% at 6.82 yuan ($1.07) on Wednesday, the last day of trading this week before a market holiday.
