HNA Group Speeds Up The Overseas Acquisitions As Bohai Leasing Acquires 100% Equity Interest In Avolon
On 7 September, Bohai Leasing Co., Ltd (“Bohai Leasing”), a majority controlled subsidiary of the HNA Group, has officially announced that it is to acquire 100% equity interest in Avolon Holdings Ltd (“Avolon”), the international aircraft leasing company, at a consideration of approximately US$2.56 billion. Upon the completion of the acquisition, Bohai Leasing would be one of the top ten aircraft leasing companies in the world.
The Signing Ceremony
Avolon, listed on the New York Stock Exchange, has rapidly expanded its fleet in recent years. According to the statistic from the aircraft magazine Airline Business, Avolon is the 11th largest aircraft leasing company in the world, based on the value of the fleet. As at 30 June 2015, Avolon had an owned, managed and committed fleet of 260 aircraft, including 143 self-owned aircraft, nine managed aircraft, and 108 aircraft obtained through signed purchase agreement. The book value of the aircraft assets has reached US$6.36 billion.
Bohai Leasing is one of the leading comprehensive leasing industry groups in China, and the only listed leasing company on the Chinese A-Share stock market, and is engaged in full license operation of both domestic and foreign financial leasing. Their major businesses include aircraft leasing, container leasing, infrastructure and high-end equipment leasing and it is the largest container leasing company in the world. Bohai Leasing also owns Hong Kong Aviation Capital (“HKAC”), Seaco and Cronos in foreign countries. Its overseas revenue accounts for 70% of its total income.
Aircraft leasing market development
Aviation leasing is a strategic element as one of the three pillars of the leasing business of Bohai Leasing. The recovery of the global aviation industry has maintained good momentum after the financial crisis. According to the forecast of Airline Business, aviation companies require 36,770 new aircraft with a value of US$5,200 billion, and more than 60% of the aircraft are obtained by leasing in the global aviation industry. Thus the aircraft leasing market offers great potential.
Bohai Leasing for its part has also accelerated the development of its aviation leasing business particularly domestically since 2013 through its wholly owned subsidiary Tianjin Bohai Leasing Co., Ltd. HKAC, the largest aircraft leasing platform of Bohai Leasing, is one of the leading companies in the global aircraft leasing market with a highly specialized capability and reasonable point of time in the lifespan of its fleet structure. Currently, HKAC has 74 aircraft in its fleet. As an analyst noted, under Bohai Leasing’s investment project announced early this year, HKAC is expected to obtain RMB 8 billion, which can be used to purchase nearly RMB 100 billion of aircraft assets and significantly expand the fleet, based on the acquisition charges for international companies and the leverage ratio of aircraft procurement loans. After Bohai Leasing has set up its aircraft leasing operation both overseas and in China, it has moved ahead of its peers by establishing the first aircraft assets management company in China, Tianjin Bohai Leasing Co. Ltd., in 2014 in order to develop the domestic civil aircraft leasing market.
The acquisition of Avolon will bring lucrative financial returns as well as enhance Bohai Leasing’s bargaining power and influence in the global aviation industry. It will benefit from greater economies of scale and synergies through the interaction with the platforms under the HNA Group. It will also reduce the cost of aviation business and enhance profit levels. This acquisition will boost the development of the China aircraft leasing market through the integration of advanced aircraft asset management, improvement of risk management, and the added resources of Avolon. It is a significant advance in the professional standards of China’s aviation leasing industry.
According to the statistics of Finance & Leasing, among the top 15 global aircraft leasing companies, two of them are PRC-funded companies, i.e. ICBC Leasing under ICBC ranked ninth and China Development Bank Leasing under China Development Bank ranked 12th. After completion of the acquisition of Avolon, Bohai Leasing would become another PRC-funded aircraft leasing company among the global top 10, demonstrating its ambition to lead the international aircraft leasing sector after rising to become the top player in the global container industry.