Target: Avolon Aerospace Leasing Ltd
Price: $4 billion to $5 billion
Buyer: China Investment Corp, Aviation Industry Corporation of China
Sponsors: Cinven Ltd, CVC Capital Partners Ltd, Oak Hill Capital Partners, Government of Singapore Investment Corp
Financial Advisers: Morgan Stanley, JPMorgan Chase
CIC is teamed up with Aviation Industry Corporation of China (AVIC), a state-owned aerospace and defense company, in its bid for Avolon, which provides aircraft leasing and lease management services to airlines and aircraft investors, one of the people told sister news service Reuters.
The buyer group has been working on a potential acquisition of Avolon for the past several months but any deal is still months away, the people said, asking not to be named because the discussions are confidential. Private equity-owned Avolon is estimated to have an equity value of around $2.5 billion, the people said. Including debt, the proposed deal could have an enterprise value of $4 billion to $5 billion, they added.
The discussions with CIC come as Avolon is simultaneously pursuing an initial public offering, in a bet that yield-hungry investors eyeing growing demand for air travel would sustain a recent boom in aircraft finance. CIC’s interest underscores strong demand for aircraft assets from Asian buyers, at a time when the region has become the world’s fastest growing market as Asian airlines tap into the spending power of travelers.
China, one of the world’s biggest buyers of aircraft, is playing a bigger part in the global aviation industry as its airlines seek to cater to the nation’s growing number of business and leisure travelers.Another Chinese consortium made an unsuccessful bid in 2012 to buy aircraft lessor International Lease Finance Corp (ILFC) from U.S. insurance giant American International Group. That proposal deal fell apart, and AIG ended up selling ILFC to AerCap Holdings NV in December.
Avolon, which is backed by private equity firms Cinven Ltd, CVC Capital Partners Ltd and Oak Hill Capital Partners, as well the sovereign wealth fund Government of Singapore Investment Corp, has been working with Morgan Stanley and JPMorgan Chase on a potential sale or IPO.
Representatives for CIC and AVIC could not be immediately reached for comment. Avolon, Cinven and Oak Hill did not respond to requests for comment. CVC declined to comment.
China Business News reported on Aug. 8 that CIC is teaming up with AVIC to bid for Avolon in a deal worth some 12 billion euros ($16 billion).
Avolon has raised $7.2 billion in capital since its launch in May 2010. It has a fleet of more than 190 aircraft serving 46 customers in 27 countries. Avolon’s focus is on young and fuel-efficient single-aisle aircraft made by Boeing Co and Airbus Group NV. In 2013, it delivered a total of 34 aircraft to its customers valued at more than $2 billion.
CIC, whose previous high-profile investments included taking a 10 percent stake in Britain’s Heathrow Airport Holdings in 2012 for 450 million pounds ($756.5 million), has not announced any deals of note in the past year as it underwent a leadership reshuffle.
Soyoung Kim and Mike Stone are correspondents for Reuters in New York. Additional reporting by Freya Berry.