Dublin-based AWAS has been put up for sale by its private equity owners in an auction that could value the aircraft lessor at US$7 billion, including debt, and draw bids from Chinese lessors and other Asian investors, sources said.
Terra Firma is working with Goldman Sachs to conduct the auction, and potential bidders have already been contacted, two sources familiar with the matter said. One of them said any transaction could be worth about US$7 billion including debt, but the process is still at an early stage and the valuation could change.
Potential buyers for AWAS include the aviation leasing company backed by Hong Kong billionaire Li Ka-shing, the aircraft leasing arm of China’s Ping An Insurance Group and other Asian lessors, mostly Chinese, financial industry sources said. Pension funds may also show interest, they said.
AWAS, among the world’s 10 biggest aircraft lessors, is the latest asset to come up for sale in the red-hot aviation leasing business where owners are cashing in on a surge in interest from cash-rich Chinese financial firms looking to boost returns amid a growing air travel market.
“AWAS offers a good platform for lessors looking for a diverse portfolio,” said one leasing executive who was not authorized to speak to the media. “The Chinese have money to spend and are keen to make a big splash.”
Terra Firma, Goldman Sachs and Ping An declined to comment, while AWAS did not offer an immediate comment on the sale process. Cheung Kong did not respond to a request for comment.
Asian lessors, led by Chinese banks, are spending billions of dollars to expand in the US$228 billion global aircraft leasing sector that offers long-term revenue in dollars and accounts for some 40 percent of the world’s airline fleet.
AWAS offers a portfolio of about 200 planes and a leasing platform through which it caters to about 90 customers such as Singapore Airlines and Qantas Airways.
Its sale plan follows the acquisition in October of CIT Group‘s aircraft leasing business by Avolon Holdings, part of China’s acquisitive HNA Group, for US$10 billion including debt.
Avolon and Asian lessors such as BOC Aviation Ltd have scaled up their operations as they take on Western firms such as AerCap Holdings and General Electric‘s GECAS which still dominate the sector.
Terra Firma, run by British financier Guy Hands, bought 75 percent of AWAS from Morgan Stanley in 2006 in a deal worth US$2.5 billion. A year later it acquired rival Pegasus for US$5.2 billion, merging the groups to create what was then the world’s third-largest plane lessor.
Over the past two years, the British private equity firm has been paring its leasing assets.
Last year, it sold 90 AWAS planes to Macquarie Group for US$4 billion.
In March 2016, Reuters reported that Terra Firma had rejected two bids from HNA Group for AWAS.
The AWAS sale process comes at a time when AirAsia Bhd, Asia’s biggest low-cost airline, is in the process of selling its fully owned leasing arm which it has valued at about US$1 billion.
Update: Canada Pension Plan Investment Board partnered with Terra Firma in acquiring in AWAS in 2006. The pension fund remains a significant minority shareholder in the business.
By Anshuman Daga (Singapore)
(Additional reporting by Tim Hepher in Paris and Pamela Barbaglia in London; Editing by Denny Thomas and Muralikumar Anantharaman)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of AWAS