ireland AerCap Holdings SA (NYSE: ARE) acquired GE Capital Aviation Services, a General Electric (NYSE: GE), in a transaction involving $ 24 billion in cash, $ 1 billion in AerCap notes and / or cash and 1.1 billion newly issued AerCap shares.
What happened: AerCap is an aircraft leasing company serving approximately 200 customers in approximately 80 countries, while GE’s aviation services business is a lessor and financier that owns, maintains on how to file bankruptcy orders approximately 1,700 aircraft. The GE company serves more than 200 customers in 75 countries from a network of 15 offices around the world.
According to the companies, the new combined corporate entity will have more than 2,000 aircraft owned and managed, more than 900 engines owned and managed, more than 300 helicopters owned and approximately 300 customers worldwide.
Upon completion of the transaction, GE is expected to own approximately 46% of the combined company and will have the right to appoint two directors to AerCap’s board of directors.
Why it happened: When the transaction closes, GE said it will use the proceeds of the transaction and its existing cash sources to reduce its debt by approximately $ 30 billion.
GE Chairman and CEO H. Lawrence Culp Jr. said the sale gave the company a new lease of life.
“Now is the right time to further accelerate our transformation,” he said in a press release. “This action will allow us to significantly reduce GE’s risk and continue on the path to being a well-capitalized company. Based on our multi-year efforts to strengthen our financial position, we plan to use the proceeds to further reduce debt for a total reduction of over $ 70 billion since the end of 2018. ”
BofA’s take on the GE deal: GE “plans to consolidate GE Capital with GE Industrial. GE has been reducing GE Capital for several years. This last step makes sense, as the timing of the GECAS merger also makes sense,” said Andrew Obin, research analyst at BofA Securities, in a note. .
“Following the consolidation of GE Capital, management expects GE Industrial’s net debt at the end of 2021 to increase to ~ $ 51 billion from $ 32.3 billion at the end of 4Q20,” said the ‘analyst. “However, rising EBITDA levels are expected to leave GE Industrial net-debt / EBITDA at ~ 6x (up from 5.9x at the end of 4Q20). Consolidation could impact GE Industrial’s credit rating.”
AER, GE price action: GE shares were trading down 6.64% to $ 13.07 in the last check on Wednesday, while AerCap shares were down 8.36% to $ 51.30.
Photo courtesy of GE.
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