Hony, CIC among anchors for BOC Aviation IPO

Other cornerstone investors include China's Silk Road Fund, CDB International, Temasek Holdings, Fosun International, China Life Franklin Asset Management, China South Industries Asset Management and Boeing. Commitments from this group represent about 52% of the targeted raise.

According to a filing, CIC and Silk Road will each take an 8.9% stake in the company after making the largest commitments of HK$776 million each. CDB will hold a 5.3% interest followed by China Life and Hony, which will each claim 4.4% stakes. BOC will retain a controlling stake in the spin-off, which is expected to achieve a market capitalization of HK$29.1 billion when it floats in June.

The IPO entails the issue of about 208 million shares priced at HK$42 apiece. This allotment will be comprised of an even split between new and existing shares. Net proceeds are expected to amount to HK$4.2 billion and will be used to fund aircraft purchases before expected increases in Chinese air transportation demand.

BOC Aviation's equipment portfolio - which is leased to 62 airlines worldwide - has grown 47% during the past five years to include 270 aircraft. The company also generates income from selling aircraft and is currently planning to offload all its planes that are more than 10 years old. It charted a 10% increase in revenue and other income during the 2015 financial year to $1.1 billion. Profit during this period improved 11% to $343.3 million.

Boeing has projected that demand for new airplanes in China during the next 20 years will equate to almost $1 trillion worth vehicles, with the country's commercial fleet expected to nearly triple during this period. Although China's low-cost carriers account for only about 8% of the sector's single-aisle demand globally, this market share is expected to increase to as much as 30% by 2034.

Recent private equity involvement in this space includes last year's sale of aircraft leasing company Avolon - which was controlled by Cinven, CVC Capital Partners, Oak Hill Capital, GIC Private and Goldman Sachs - to Chinese aviation and shipping conglomerate HNA Group for $2.5 billion.

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• Topics
• Greater China
• Consumer
• IPO
• China
• Transportation
• China Development Bank
• Temasek Holdings
• Hony Capital
• China Life
• Bank of China
• Fosun Group