Cinven sells out of aircraft leaser Avolon in $7.6 bln sale

Cinven is selling its stake in Avolon, an international aircraft leasing company, in the sale of the company to Bohai Leasing Co for $7.6 billion. Cinven and its investment partners created Avolon in 2010 with an enterprise value of $1.4 billion, including equity commitments of $750 million from Cinven, CVC Capital Partners and Oak Hill Capital Partners.

Press Release

European private equity firm Cinven today announces that it will fully realise its shareholding in Avolon (‘the Group’), the international aircraft leasing company, following completion of the acquisition of 100% of the share capital of the Group by Bohai Leasing Co., Ltd (‘Bohai’), the Chinese leasing business, part of HNA Group, for US$7.6 billion.

Bohai and Avolon have reached a definitive merger agreement at a price of US$31 cash per common share, representing a 55% premium to Avolon’s initial public offering (‘IPO’) on the New York Stock Exchange in December 2014, at US$20 per share.

Cinven, along with its partners, created Avolon in May 2010 with an enterprise value of US$1.4 billion including equal equity commitments totalling US$750 million from Cinven and two other private equity firms. Cinven achieved a partial realisation of its shareholding in Avolon following the Group’s successful IPO, after which Cinven retained 14 million shares representing a 17.3% shareholding in the Group.

In 2009, the Cinven Financial Services team identified the aircraft leasing sector as an attractive market with long-term structural growth characteristics, despite suffering from short-term dislocation following the collapse of Lehman Brothers. In 2010 Cinven invested in Avolon, backing the incumbent management team led by Domhnal Slattery.

During Cinven’s ownership, Avolon has grown from a portfolio of 26 aircraft in 2010 to 260 aircraft today with a customer base of 56 airlines across 33 countries. Since 2011, its revenues and EBITDA have increased by over fivefold to US$697 million and US$582 million respectively to the 12 months to June 2015.

Key highlights under Cinven’s ownership have included:

• Strengthening the highly experienced buy-in management team to create a strong platform for international growth;
• Executing a successful international growth strategy focused on:
− Penetrating high growth emerging market economies, given the rise of middle-class first time flyers, particularly in Asia with support of Cinven’s Portfolio team;
− Broadening Avolon’s customer base, with additional offices opened in Singapore and Dubai for expansion into Asia and the Middle East, respectively; and
• Attracting a committed capital base both in terms of equity – securing an additional US$300 million of new equity from the Government of Singapore (‘GIC’) in October 2011, also further strengthening ties in the Asia-Pacific region; and debt funding including raising US$636 million of asset-backed security notes, marking the entrance of Avolon into the public debt markets.

Caspar Berendsen, Partner in Cinven’s Financial Services team, said:

“The financial crisis in 2008/9 led to an attractive investment opportunity in the aircraft leasing sector; some of Avolon’s major competitors were no longer active in the market – due to structural issues with their parent companies – but there remained strong market demand from airlines to lease aircraft, in particular the latest narrow-bodied fuel efficient aircraft provided by Avolon.

Cinven’s Financial Services team identified and backed a highly talented and experienced management team, led by Domhnal Slattery, to create Avolon. We have worked closely with the team to internationalise the business, with particular involvement from our Portfolio team in Asia, and to ensure the Group had committed capital in place to fund further growth. The strong performance of the Group reflects both the quality of Avolon’s franchise and the ongoing level of demand for leased aircraft. The acquisition by Bohai is testament to the success of Avolon and we wish them every success.”
Domhnal Slattery, CEO of Avolon, added:

“I would like to thank all of our shareholders and, in particular, our sponsors who have been with us on this journey since our foundation in 2010. Avolon would not be the leading industry player it is today without the commitment and hard work of our team who have built a business with an enterprise value of US$7.6 billion. It is a remarkable achievement and one of which we are all very proud. We look forward to the strategic development of Avolon under Bohai’s leadership.”

This transaction is subject to customary conditions including receipt of certain required regulatory approvals and the approval of Avolon and Bohai’s shareholders. The transaction is expected to close in the fourth quarter of 2015.

Cinven’s investment in Avolon is part of its broader Financial Services portfolio, including Premium Credit, Heidelberger Leben, Guardian Financial Services and Partnership.