New York based multinational insurance giant, American International Group (aka AIG) has announced to sell majority stake in its aircraft leasing unit International Lease Finance Corp. (ILFC) to AerCap Holdings, for $5.4 billion. AIG has been trying to sell stake in ILFC since the global economic meltdown in 2008 when AIG came around near-bankruptcy and government bail out was done.
International Lease Finance Corporation is a leading aircraft lessor based in California and is the largest aircraft lessor in value terms. It leases Boeing and Airbus aircraft to leading airlines across the globe. The company was acquired by AIG in 1990 for $1.3 biilion in stock swap. While AIG was going through the worst fortune of its history it tried to come out of non-core operations i.e. non-insurance operations. In September 2011, company tried to spun off ILFC through a initial public offering. But same was not materialized. Thereafter, company announced the sale of 90% of stake in ILFC to consortium of Chinese companies to repay its government bailout of $182.5 billion. But same was backed up by August 2013.
Although the deal announced now also faces a lot of regulatory approvals, both US and international, and if cleared it will close in Q2 2014. ILFC owns a fleet of 989 aircraft. A sper the terms of the deal, AIG will get $3 billion in cash and 97.6 million shares of AerCap Holdings i.e. 46% of AerCap's stock. Apart from this AIG has also agreed to provide $1 billion five year unsecured revolving credit facility when the deal closes.
AerCap is the world's largest aircraft leading company in value terms. It is head-quartered in The Netherlands. Its fleet comprised of 337 aircraft. Out of these 250 are owned by company and rest are managed on behalf of third parties.
As per company management, this transaction provides strong foundation for ILFC for continued market leadership and growth. Company will, after this merger, be more strategically positioned to take on formidable rival GE Capital Aviation Service with fleet size of 1700 aircraft.
In Moday trading shares of AIG rose by 2.2% and AIrCap's stock by 33%. It seems to be a win-win situation for both companies.
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