x Abu Dhabi, UAEMonday 24 July 2017

China takes AIG plane unit for $4.2bn

A Chinese group has agreed to buy 80.1 per cent of American International Group's plane-leasing unit for US$4.23 billion.

ILFC's acquisition of 80.1 per cent of AIG gives the group control of the world's second-largest aircraft lessor. Carlos Barria / Reuters
ILFC's acquisition of 80.1 per cent of AIG gives the group control of the world's second-largest aircraft lessor. Carlos Barria / Reuters

A Chinese group has agreed to buy 80.1 per cent of American International Group's (AIG) plane-leasing unit for US$4.23 billion (Dh15.53bn) in the nation's largest acquisition of a US company.

The International Lease Finance Corporation (ILFC) acquirers, led by Weng Xianding, the New China Trust Company chairman, have an option to buy another 9.9 per cent, AIG, based in New York, said yesterday. The transaction, which values ILFC at $5.3bn, passes China Investment Corporation's $3bn purchase of a stake in Blackstone Group in 2007 as the biggest Chinese-US deal. The acquisition gives the group control of the world's second-largest aircraft lessor as rising travel in China and Asia spurs demand for planes. AIG, which counts the US government as its largest investor, is selling the unit based in Los Angeles as Robert Benmosche, the chief executive, focuses on insurance operations and works to reduce debt.

"This ILFC deal squarely places the leasing business where future growth will be," said Will Horton, an analyst based in Hong Kong at Capa Centre for Aviation. "There are large opportunities in China, but also in countries like Indonesia and Malaysia."

China and Indonesia will account for about 40 percent of all aircraft deliveries through 2026, with the two countries taking more than 500 planes each, he said.

AIG owns or manages more than 1,000 planes with another 229 on order. It is also the largest aircraft lessor in China, with a 30 per cent market share and more than 175 aircraft leased to 16 airlines in the Greater China region, according to the company.

Globally, it trails General Electric's GE Capital Aviation Services.

"This transaction allows ILFC to continue to serve its worldwide partners in the aviation industry with world-class service while accelerating its growth in important markets, including Asia," Mr Weng said.

Cash-rich Asian investors are expanding plane leasing as European banks cut lending amid a regional debt crisis.

A group led by Sumitomo Mitsui Financial Group this year bought Royal Bank of Scotland Group's leasing unit for about $7.3bn. Industrial & Commercial Bank of China's leasing arm signed an order for 50 Airbus A320s in August. Bank of China bought Singapore Aircraft Leasing Enterprise for $965 million in December 2006.

* with Bloomberg News