Takeover battle for Avolon steps up a gear with two bidders

Offer of $2.6bn from China’s Bohai values Dublin based lessor at 55% premium to December IPO

Domhnal Slattery , CEO Avolon. The Dublin based aircraft leasing group is subject to a $2.6bn takeover offer. (Photograph: Eric Luke / The Irish Times)

Domhnal Slattery , CEO Avolon. The Dublin based aircraft leasing group is subject to a $2.6bn takeover offer. (Photograph: Eric Luke / The Irish Times)

 

China’s Bohai Leasing has offered $31 a share to acquire 100 per cent of Avolon, valuing the Irish aircraft leasing group at $2.55 billion, a premium of 55 per cent on its recent IPO.

Avolon, founded in 2010 by Clare aviation entrepreneur Domhnal Slattery, floated on the New York Stock Exchange with a market capitalisation of $1.6bn in December 2014, and is currently trading at about $29 a share.

The offer follows Bohai’s agreement earlier this month to acquire 20 per cent of Avolon for $26 a share, or $429m. Bohai is a subsidiary of the Fortune 500 conglomerate HNA group, owner of Hainan Airlines.

The deal arose as, subsequent to the tender offer from Bohai, Avolon received a bid from an undisclosed third party for 100 per cent of its equity at $30 a share. Once Bohai was notified of this move, it countered with a non-binding offer to also acquire 100 per cent of Avolon at a price of $31 a share.

In a note published following the announcement, brokers at Cowen and Company said that they considered the offers “reasonable” they “would not be surprised if there are additional offers for the company”.

In a statement, Avolon said that it has not accepted or rejected either offer, and “continues to carefully evaluate these offers with its financial and legal advisors and has authorised its financial advisors to continue negotiations with both offerors regarding their respective offers”.

While technically the $26 tender offer for a 20 per cent stake in Avolon is still due to go ahead, given the two takeover offers, one of which is from Bohai itself, it may be rejected.

At the time of its original tender offer, Bohai said that it was interested in a 20 per cent stake in Avolon because it would accelerate its exposure to the global aircraft leasing sector. In turn, the deal would have strengthened Avolon’s relationships in the rapidly growing Chinese aviation market.

Chinese lessors, many of whom are backed by state-owned banks, have been expanding in recent years. Ahead of Avolon’s IPO, the lessor was in talks with China’s $653 billion sovereign wealth fund China Investment Corp (CIC),about a possible takeover.

Avolon floated on the New York Stock Exchange in December 2014 at a price of $20 per share and a market capitalisation of $1.6bn. At the time, original backers, private equity firms Cinven, CVC Capital Partners, Oak Hill Capital Partners and Singapore’s sovereign wealth fund, all sold a portion of their stakes.

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