Royal Bank of Scotland Group’s aviation division has finally been sold off for about $7.3bn in the world’s largest acquisition of a leasing business thus far. Sumitomo Mitsui Financial Group, Japan’s second-largest bank by market value, clubbed together to form the bid with its main lending unit, as well as Sumitomo Mitsui Finance & Leasing Co. and trading company Sumitomo Corp to pull off the deal. They have won the bidding war to purchase all 206 aircraft along with commitments to buy another 87 by 2015. Sumitomo Mitsui said it will use RBS Aviation Capital to expand in emerging markets and Asia. Advising on the winning deal were: Barclays Capital and Sumitomo Mitsui’s Nikko unit advising Sumitomo Mitsui, with Goldman Sachs, Clifford Chance and Milbank Tweed Hadley & McCloy representing RBS.
This is a big win for RBS Aviation. Over the past twelve months the UK taxpayer-owned lessor has looked at splitting the book in two between a California-based lessor and a Dublin-based lessor but then turned it sights to Asia after the UK government demanded a tip-top price for the assets. In the end, RBS Aviation has done well. They have got shot of a book of A320 aircraft that are not aging well against the 737-800, with lease rate outlooks that are falling through the floor. In fact much like a new car – once Sumitomo Mitsui has driven out of RBS with the signed agreement in hand the value of the assets will have fallen by around $1bn from the $7.3bn that was paid, such is the nature of strongly-contested auctions.
Sumitomo Mitsui and Sumitomo Corp. set up aircraft leasing company, SMFL Aircraft Capital Corp., in December 2008 and have been vigorously expanding the business ever since and the RBS Aviation portfolio is destined for there.
Sumitomo Mitsui in the final round fended off bids from China Development Bank Corp. and Wells Fargo & Co. The deal is the biggest overseas takeover by a Japanese bank since at least 1999.
China Development Bank actually bid the most, but in the event struggled to gain government approval for a purchase at speed and to be frank RBS did string things out by a month or so to see if CDB could finalise things their end. In the end RBS went for the solid option that we report here today. The sale will be completed before the end of the third quarter, conditional upon receipt of antitrust and regulatory approvals as is usual.
Sumitomo Mitsui rose 1% to 2,215 yen on the Tokyo Stock Exchange. Sumitomo gained 0.7% to 1,041 yen. RBS closed 1.3% higher at 24.4 pence yesterday in London .
RBS Aviation is sold to a group led by Sumitomo Mitsui Financial Group Inc. for $7.3bn (£4.5bn) – SMFL Aviation Capital Corp will get the portfolio
