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The
two companies announced a deal on Wednesday after days of
speculation surrounding the takeover of GE's leasing arm GECAS
to create a portfolio of more than 2,000 jets, dwarfing industry
rivals.
The tie-up creates easily the largest buyer of jetliners built
by planemakers Airbus and Boeing and will reshape a global air
finance industry that has attracted a flood of capital in recent
years as investors elsewhere look for higher returns.
But it comes at a time when the independence of several leasing
firms has been brought into question by the coronavirus crisis
and could trigger more consolidation, analysts say.
In New York, shares in GE rose 2% to $14.28 in pre-market trade.
AerCap was up 3.6% at $58.
The deal to buy GECAS, or GE Capital Aviation Services, includes
about $24 billion in cash and $1 billion paid in AerCap notes
and/or cash upon closing. GE will hold a stake of about 46% in
the combined company.
It marks the latest move by GE Chief Executive Larry Culp to
reduce debt and focus the conglomerate on its industrial core -
power, renewable energy, aviation, and healthcare.
Culp took over the reins at the struggling conglomerate in 2018,
months after the 129-year-old company dropped out of Wall
Street's blue-chip index following years of dwindling profits.
GE said it plans to reduce debt by about $30 billion after
closing using transaction proceeds and existing cash sources.
The deal, which includes the transfer of about 300 helicopters,
is expected to close in the fourth quarter of 2021.
Citi and Goldman Sachs have provided AerCap with $24 billion of
committed financing for the transaction.
AerCap said the deal would swell its debt to 3.0 times equity
but this adjusted ratio would return "rapidly" to a targeted
level of 2.7.
Analysts have said the scale of the combined entity, controlling
about three times the number of aircraft as its nearest
competitor, Dublin-based Avolon, could force AerCap to offload
aircraft to meet anti-trust requirements.
(Additional reporting by Tim Hepher, Rachit Vats, Conor
Humphries, Rajesh Kumar Singh, Sanjana Shivdas; editing by
Sriraj Kalluvila, Kirsten Donovan)
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