General Electric has reached an agreement to sell its Gecas leasing division to AerCap in a $30 billion deal that stands to profoundly change the competitive balance of the global aircraft leasing business, the companies confirmed Wednesday.
Under the terms of the transaction, GE will receive some $24 billion in cash, 111.5 million ordinary shares equal to a 46 percent ownership of the combined company, and $1 billion paid in AerCap notes and/or cash upon closing. In return, GE will transfer $34 billion of Gecas’s net assets, including its engine leasing and Milestone helicopter leasing businesses, to AerCap. Current Gecas purchase obligations will transfer to AerCap, and Gecas’s more than 400 employees also will transfer to AerCap upon completion of the transaction.
While AerCap said it expects the deal to close by this year’s fourth quarter, GE estimated the deal will close in nine to 12 months, subject to regulatory approvals. GE will retain the right to nominate two directors to newly created seats on the AerCap board.
AerCap has secured $24 billion in financing commitments from its banking group to support the closing of the transaction.
Once complete, the deal would result in AerCap’s portfolio increasing from some 1,050 to more than 2,000 owned and managed aircraft. The combined portfolio will also include 900 owned and managed engines and 300 owned helicopters. The deal marks the fourth such acquisition for the Irish leasing company since it bought Debis AirFinance in 2005. AerCap then acquired Genesis Leasing in 2009 and ILFC in 2013.
“Gecas is a highly attractive business and this transaction continues our strong track record of capital allocation,” said AerCap CEO Aengus Kelly. “As the recovery in air travel gathers pace, this transaction represents a unique opportunity that we believe will create long-term value for our investors. This business combination will also strengthen our longstanding partnership with GE Aviation, which we look forward to working with closely in the future.”
Narrowbody aircraft will account for some 60 percent of the combined fleet, said AerCap. New-technology aircraft—namely the Airbus A320neo and A350 and Boeing 737 Max and 787—will account for 56 percent of AerCap’s in-service fleet and the combined company expects that proportion to grow to 75 percent by 2024. The combination results in an order book of 493 new-technology aircraft, of which narrowbodies will account for more than 90 percent.
On the engine side, CFM56s and Leaps account for the “vast majority” of the in-service fleet, said Kelly. “This business is expected to be around 5 percent of assets, but it adds much more than that in terms of relationships, expertise, and product offerings,” he explained.