As anticipated – And as written here more than once during 2012: The Chinese just could not let ILFC get away and they have made sure that they have got in before momentum gathers behind any IPO talk and suitors line-up. This is a story of over 35% market share, assets of $39.6 billion, 1,000 aircraft with 200 airlines in 80 countries and with over 200 aircraft and options for the same on order. No doubt the OEMs will be sporting wide grins today.
American International Group, Inc. (AIG) and an investor group led by Mr. Weng Xianding, the Chairman of New China Trust Co. Ltd., announced today that they have entered into an agreement under which AIG will sell up to a 90% stake in International Lease Finance Corporation (ILFC), to the investor group in a transaction that values ILFC at approximately US$5.28 billion.
The investor group is comprised of New China Trust Co. Ltd., China Aviation Industrial Fund and P3 Investments Ltd. They have agreed to acquire 80.1% of ILFC for approximately US$4.23 billion, with an option to acquire an additional 9.9% stake. The transaction is expected to close in the second quarter of 2013.
Upon receipt of the required Chinese regulatory approvals the investor group is expected to be expanded to include New China Life Insurance Co. Ltd. and an investment arm of ICBC International as regulatory approval is granted and the option to acquire the additional 9.9% is excercised. The transaction is subject to required regulatory approvals, including all applicable U.S. and Chinese regulatory reviews and approvals, including a submission of the offer for review by the U.S. Committee on Foreign Investment, or CFIUS, which vets foreign deals for security concerns.
This is a great deal for all at AIG, they quickly and cleanly get the divestment they wanted, and at the same time keep a 10% passive stake that is sure to rocket in value, Mr. Weng Xianding, Chairman of New China Trust Co. Ltd moved quickly to assure ILFC key staff that they are safe; “Our group shares a commitment to ILFC’s experienced management team, its operating philosophy, and its presence in the United States. This transaction allows ILFC to continue to serve its worldwide partners in the aviation industry with world-class service while accelerating its growth in important markets, including Asia.”
Indeed it is likely that ILFC will now have to go on a hiring spree in California to cover the AIG supported operations as under this agreement ILFC will retain operational independence and continue to be headquartered in Los Angeles and incorporated in the U.S. following the closing of this transaction and will continue to be registered with the U.S. Securities and Exchange Commission.
Upon closing, a new Board of Directors for ILFC will be appointed. A majority of the new Board will include leading independent U.S. and European aerospace and financial industry experts, including Mr. Benmosche from AIG. The balance of the Board will be comprised of representatives of the investor group. “This is an exciting new chapter for ILFC that will position the company for robust future growth,” stated Henri Courpron, CEO of ILFC. “With existing management remaining in place, the transition will be seamless, allowing ILFC to maintain its focus on delivering the best mix of modern aircraft to meet our customers’ needs around the world. We look forward to working with the investor group to explore new opportunities for our business. Last year, ILFC opened new offices in Beijing and Singapore dedicated to regional customer support as the region’s aviation growth and demand is well established and expected to increase significantly.”
Credit Suisse is acting as financial advisor to the investor group in connection with this transaction, and Simpson Thacher & Bartlett is acting as legal advisor to the investor group.