A unit of China's HNA Group on Tuesday said it agreed to pay
$429 million for a 20% stake in aircraft lessor Avolon Holdings
Ltd., even as concerns emerge about a potential slowdown in the
Chinese airline market.
HNA's Bohai Leasing arm plans to acquire the stake in
Ireland-based Avolon, which listed on the New York Stock Exchange
last December after the collapse of takeover talks with a number of
potential buyers in Asia, including Avic Capital Co. of China.
Chinese banks and conglomerates have become increasingly
important sources of funding for the global airline industry as
Airbus Group SE and Boeing Co. deliver from their record aircraft
backlogs, and demand from China's airlines underpins a large part
of both manufacturers' plans to boost production.
However, China's recent stock-market volatility has driven
concerns among some analysts that the country's fast-growing
airline market could cool. This could delay orders for thousands of
new jetliners in China, a market that has been hotly pursued by
lessors such as Avolon that rent jets to airlines.
Avolon didn't comment on current China market conditions, though
said in a statement that the market "offers one of the most
compelling growth opportunities in global aviation over the next
two decades".
Analysts have said Chinese airlines require more than twice the
number of aircraft currently under order, with deals expected to
increase when the country's latest five-year aviation plan emerges
later this year.
Private-equity-controlled Avolon is already one of the world's
top 10 aircraft lessors by fleet value, with an owned and managed
fleet of more than 140 jets and commitments for more than 100
planes, many acquired direct from airlines and then rented back to
carriers.
Bohai committed to acquire the Avolon shares for $26 each, a
14.5% premium to its average price last week. Avolon's initial
public offering priced at $20 a share. Bohai's offer is expected to
be formally launched on or around July 31 and will be open to all
existing shareholders.
HNA has extensive aviation interests, including Hainan Airlines
and Hong Kong Airlines.
Avolon was launched in May 2010 with private-equity backing by a
group of former Royal Bank of Scotland PLC executives. Its largest
shareholders are Cinven Partners LLP, CVC Capital Partners, Oak
Hill Capital Partners and an affiliate of the Government of
Singapore Investment Corp.
Write to Doug Cameron at doug.cameron@wsj.com
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