$30B Aercap acquisition of Gecas creates a giant in the aircraft leasing industry 

-By Josh Abraham, London School of Economics

DEAL OVERVIEW

Acquirer: AerCap 

Target: General Electric Capital Aviation Services (Gecas) 

Value: US$30 billion ($24 billion in cash, 46% ownership stake in combined company, $1 billion in AerCap notes and/or cash upon closing) 

Announced date: March 10th, 2021 

Closed date: Ongoing 

Financial Advisors: Citi and Morgan Stanley for Aercap, PJT Partners LP, Goldman Sachs, and Evercore for Gecas 

Legal Counsel: Cravath, Swaine & Moore LLP, NautaDutilh NV and McCann Fitzgerald for AerCap, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Clifford Chance LLP, and A&L Goodbod 

COMPANY DETAILS

Acquiring company: AerCap

AerCap is the world’s largest aviation lessor, and the largest owner of commercial aircraft, with headquarters situated in Dublin, and further offices in Shannon, Los Angeles, Singapore, Amsterdam, Shanghai, Abu Dhabi, Seattle, and Toulouse 

Credits: AerCap

CEO: Aengus Kelly 

Number of Employees: 377 

Market cap: $7.9 billion 

Enterprise Value: $34.5 billion 

LTM Revenue: $4.1 billion 

LTM EBITDA:  $2.1 billion 

Target company: Gecas

Gecas is a subsidiary of General Electric (GE), and is another leading aviation lessor and financier. With 15 offices worldwide, the company owns 1700 aircraft, and supplies freighters, engines, helicopters or materials 

Credits: Gecas

CEO: H. Lawrence Culp, Jr. 

Number of Employees: 400 

Market cap: N/A 

Enterprise Value: N/A 

LTM Revenue: N/A 

LTM EBITDA: N/A 

RATIONALE

A key reason behind this deal is the obvious synergies than can be exploited. With both companies in the aviation leasing business, this will allow for greater market share overall in the industry for AerCap; the combined entity would control about 18% of the current global leased fleet of Western-manufactured narrowbodies and widebodies, 13 percentage points higher than the next largest player. This is strengthened by the fact that they both have non-overlapping customer bases. Moreover, for the acquirer, adding an additional 493 new technology aircraft to their portfolio is an equally exciting prospect. On GE’s side, the deal will allow them to meet their targets of deleveraging to the value of $3 billion over the next year, while also reducing risk and cashing in on its largest unit while possible, having seen its revenue dwindle by 20% to $4 billion in 2020, as a result of the pandemic 

RISKS AND UNCERTAINTIES

The main risk of this merger comes in the form of anti-competitive practice. With both companies being the two largest players in the industry by a considerable distance, an investigation by both UK and US regulators seems likely, or even the demand of significant concessions. However, with the combined entity still expected to control less than 25% of the market, the lack of monopoly stature does ease the likelihod of this to some extent. A further risk is that with the world still living with the pandemic and its effects, it is unclear whether the airline industry will ever return to its usual performance pre-2020 in the short run, and thus the financial benefits expected from this deal may not be realised until further down the line. 

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