Japan’s SMFG beats CDB to aircraft-leasing deal
Japan’s Sumitomo Mitsui Financial Group (SMFG) and Sumitomo Corp. have agreed to purchase Royal Bank of Scotland’s (RBS) aircraft-leasing business in a deal worth $7.3 billion. SMFG will take around 70% of RBS Aviation Capital, with trading company Sumitomo holding the rest.
The Japanese team narrowly beat out China Development Bank, while Wells Fargo and a group led by Australia's Macquarie were also reportedly interested in the asset.
RBS Aviation Capital was founded in 2001 when RBS acquired a boutique aircraft advisory company. It has sold 170 commercial aircraft valued at over $6 billion in the last seven years and its current operating lease aircraft portfolio is worth in excess of $8 billion. The acquisition will boost SMFG's existing leasing business, which generates bigger profit margins than straight corporate loans.
Analysts told Reuters that this is likely to be the first of a wave of purchases by Japanese financial services players as they pick up assets offloaded by European banks eager to shed non-core assets. Private equity firms are also expected to look for deals.
Following its bailout by the British government during the global financial crisis, RBS sold its project finance assets in Europe, the Middle East and Africa to Mitsubishi UFJ Financial Group. In October 2011, China Investment Corp. and The Blackstone Group each took a 25% stake worth $100 million in RBS' commercial real estate portfolio.
RBS Aviation Capital is not the only aircraft leasing business to have attracted interest from private equity. Also in October, Government of Singapore Investment Corporation (GIC) paid $300 million for a 20% stake in Dublin-based aircraft-leasing group Avolon. The company is owned by private equity firms CVC Capital Partners, Civen and Oak Hill Capitall Partners.
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