Aircraft lessor AerCap to buy Genesis for $303 million
NEW YORK - Aircraft leasing company AerCap Holdings said on Friday it would buy rival Genesis Lease Ltd for about $302.6 million in stock, giving it greater scale and access to more funds for aircraft purchases.
The deal comes as the industry faces some strong headwinds. Airlines worldwide are suffering from weak economies, the financial crisis has made funding hard to come by and some distressed companies are shedding their aircraft leasing units.
American International Group Inc is selling International Lease Finance Corp, Royal Bank of Scotland Group Plc is considering options for RBS Aviation and CIT Group Inc is expected to put its business on the market.
The deal will give AerCap access to $200 million of unrestricted cash from Genesis over the next two years, AerCap Chief Financial Officer Keith Helming said.
About $1.1 billion in Genesis's debt facility will also be transferred to AerCap, although the drawdown period under that is only through April 2010, Helming said.
(With) this deal we have a portfolio that's generating a reasonable amount of profit, which is effectively helping to support the shares that we issue, Helming said. Then there is $200 million of unrestricted cash that we can use for supporting our existing capex program, as well as looking for additional opportunities in the market place.
But the shares of Shannon, Ireland-based Genesis fell 1.4 percent, or 12 cents, to $8.33 in afternoon trading on the New York Stock Exchange on Friday, while AerCap fell 3.6 percent, or 32 cents, to $8.49.
Heath Winter, an analyst at Think 20/20 Research, attributed the fall in AerCap shares to arbitrageur activity and concerns about dilution due to the deal.
I would imagine the Genesis Lease stock is just tracking it. I would imagine that you get a fairly high number of arbitragers who are seeking to maintain a certain spread, Winter said.
DEAL TERMS
The agreement calls for the exchange of one AerCap common share for each Genesis share, which was worth $8.81 at Thursday's market close. The company had 34.35 million shares outstanding as of June 30.
AerCap said it valued the deal at $1.75 billion based on Genesis' assets.
The deal represents a 4.2 percent premium to Genesis' Thursday closing stock price of $8.45.
But rumors of a deal were in the market earlier and responding to stock movement, Genesis confirmed on Monday that it was in talks about a transaction with an unnamed party.
It represents an average premium of 45 percent, based on the daily closing prices between July 31 and September 11.
AerCap Chief Executive Klaus Heinemann and Helming will continue to lead the company. Three directors from Genesis will be nominated for election to the AerCap board.
Genesis will become a subsidiary of AerCap.
The boards of both companies have approved the deal, which they expect to close in the fourth quarter. Genesis shareholders are expected to own about 29 percent of the combined company.
The combined company will have a fleet of 358 commercial aircraft and 83 engines, with 116 airline customers in 50 countries. The average age of its owned aircraft fleet is 6.6 years.
General Electric Co's GE Capital Aviation Services, which has acted as servicer for Genesis' portfolio, will continue to provide most asset management services for that fleet in the near term. But GECAS has agreed to terminate the arrangement early at AerCap's option. AerCap has also signed a letter of intent to buy 13 aircraft from GECAS.
Morgan Stanley and UBS acted as financial advisors to AerCap, while Citigroup advised Genesis on the deal.
(Reporting by Deepa Seetharaman and Paritosh Bansal, editing by Dave Zimmerman, Lisa Von Ahn and Andre Grenon)
© Copyright Thomson Reuters 2024. All rights reserved.