China’s AVIC confirms talks to buy PE-backed Avolon

AVIC was responding to media reports that it had teamed up with China Investment Corporation (CIC), the country's sovereign wealth fund, to buy the asset in a deal worth EUR12 billion ($9.6 billion). It was further claimed that AVIC Capital would take 55-60% of the business, and take responsibility for operations, with CIC holding the balance.

The company stressed in a regulatory filing that there was no guarantee a deal would go through and that the cited transaction size was inaccurate. Reuters reported last week that CIC and AVIC were in talks to buy Avolon for $4-5 billion, including debt.

Avolon was set up in 2010 and raised initial capital of $1.4 billion, of which $750 million was equity supplied by Oak Hill, CVC and Cinven and the rest debt. At the time, the company had executed contracts and letters of intent for the purchase of 26 aircraft and provided lease management services on further two aircraft.

Singapore sovereign wealth fund GIC Private acquired a 20% stake in the business for $300 million in 2011, by which point Avolon's fleet had grown to 88 aircraft, with 26 customers in 18 countries. More than one third of this fleet was leased in Asia and Avolon expected this share to increase, based on projections that Asia will drive approximately half of global air traffic growth over the next 20 years.

Avolon, which is headquartered in Dublin, now has 223 aircraft and emerging Asia accounts for 30% of its business, with developed Asia on 5%. It has 48 airline customers in 27 countries, including China Eastern and Spring Airlines, as well as Taiwan-based China Airlines.

In 2012, China Development Bank lost out to Japan's Sumitomo Mitsui Financial Group (SMFG) and Sumitomo Corp. on the $7.3 billion acquisition of Royal Bank of Scotland's aircraft-leasing business.

A consortium comprising New China Trust, AVIC-backed China Aviation Industrial Fund and P3 Investments - a fund run by former Primus Financial Holdings executive Wing-Fai Ng - engaged in a protracted pursuit of AIG-owned International Lease Finance Corporation (ILFC), the world's second-largest jet-leasing company. It was eventually sold to Netherlands-based AerCap at the end of last year.

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• Topics
• Greater China
• Industrials
• Buyouts
• Exits
• Transportation
• China
• CIC
• buyout
• Cinven
• CVC Capital Partners
• Exit
• Trade sale