Financial and insurance conglomerate American International Group Inc (NYSE:AIG) announced today that it is selling its aircraft leasing business International Lease Finance Corp. to AerCap Holdings N.V. (NYSE:AER) for $5.4 billion. The terms of the deal included $3 billion in cash and 97.6 million shares of AerCap Holdings NV — around 46% of AerCap’s outstanding shares. AIG is also providing a $1-billion, five-year unsecured revolving credit facility, accessible as soon as the deal closes.
Deal long time coming
This deal took over five years to come to fruition, as American International Group Inc (NYSE:AIG) first put ILFC on the market back in 2008 to try and raise cash. AIG acquired ILFC in 1990 for $1.3 billion in a stock swap deal, and had identified it as a potentially salable non-core asset at that time. ILFC had struggled in borrowing to finance aircraft for leasing since 2008.
“This transaction creates a strong foundation for ILFC and positions it for continued market leadership and strategic growth,” said Robert H. Benmosche, American International Group Inc (NYSE:AIG)’s chief executive.
Although it has bounced back strongly over the last few years, American International Group Inc (NYSE:AIG) was heavily over-leveraged when the 2008 financial crisis struck, and had to accept a huge federal bailout just to avoid bankruptcy. Among the numerous conditions of the federal financing were strict limits on executive compensation, and this resulted in the departure of much of the management of ILFC, including company co-founder and chief executive officer Steven Udvar-Hazy, who resigned and almost immediately started a competing aircraft-leasing business.
Deal expands AerCap’s reach
AerCap Holdings N.V. (NYSE:AER) is an international aircraft leasing company with a number of global offices and headquarters in both the U.S. and Ireland. This merger is expected to significantly increase AerCap’s presence in the aircraft-leasing sector.
The companies said the deal is scheduled to close in 2Q 2014.
American International Group Inc (NYSE:AIG) is currently $50.41, up 68 cents, at 12:48 PM EST Monday.
AerCap Holdings N.V. (NYSE:AER) is currently trading at $32.69, up $7.76, at 12:48 PM EST Monday.