Private Equity Backed Avolon Planning for IPO


December 2, 2014

The markets have seen plenty of initial public offerings (IPOs) this quarter and the Irish aircraft lessor is set to be the next in line. The private equity backed company is going ahead with the IPO as potential buyers pull out their offers.


According to The Street, the company is planning to sell 13.6 million shares for a price of $21 to $23 a share. This would give the company a valuation of around $6 billion. The company will list on the New York Stock Exchange.


Chinese AVIC Capital Pulls Out
The news came after Chinese AVIC Capital and its consortium of investors decided to remove its bid for the Dublin-based company. The Chinese aerospace and defence company didn’t specify its reasons for pulling out and according to Global Times, the firm didn’t announce its proposed price for Avolon.


Reuters reported that shareholders had rejected AVIC Capital’s bid and deemed it too low. AVIC Capital was bidding for the company together with China’s sovereign wealth fund CIC.


This is only the second time a Chinese investor has failed in its bid over a Western leasing asset. In 2012, a Chinese consortium failed to purchase International Lease Finance Corp. AIG ended up selling the company to AerCarp Holding instead. It remains to be seen whether AVIC Capital goes after another similar company in the near future.


Avolon’s Global Presence
Avolon is an aircraft lessor, which currently owns and leases more than 120 jets to 48 different airlines. It is owner by a consortium of private equity firms, most notably by CVC Capital Partners, Cinven Partners LLP and Oak Hill Capital Partners.


The company was founded in 2010 and it “booked $557 million in sales for the 12 months ended September” (Nasdaq). J.P. Morgan, Morgan Stanley, Citi, UBS Investment bank and Wells Fargo Securities are announced as the book runners on the deal. Avalon is hoping to list in the second week of December.


Furthermore, the company has been growing steadily in recent years and The Street estimated it has “$6.6 billion worth of planes on order”. Furthermore, the leasing industry has seen impressive growth in the past few decades. The benefits of leasing aircrafts are numerous, with airlines hoping to “keep planes off the balance sheet”.


Aircraft manufacturer Boeing Co. believes nearly half of aircrafts operated by airlines will become leased aircrafts by 2020. This is quite a change from the 2% in 1980 and 24% in 2000.


Flurry of Deals
It isn’t any wonder then that the industry has seen a flurry of deals and IPOs in recent months. As mentioned earlier, AerCap Holdings acquired International Lease Finance Corp for $5.4 billion. In October, General Electric’s air leasing branch reported its buying Milestones Aviation Group, another big IPO candidate for $1.78 billion.


Private equity firms have been interested in aerospace companies for a long time and the firms behind Avolon could benefit a lot from the IPO. The tough market conditions have put some companies off from IPO, but it is unlikely Avolon will back off from its plans now.

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