Anthony Palazzo
(Bloomberg) — Air Lease Corp., the aviation finance firm built by industry pioneer Steven Udvar-Házy, agreed to a $7.4 billion sale to a group led by Sumitomo Corp., adding to consolidation in an industry that plays an increasingly important role in aircraft purchases.
Investors in Los Angeles-based Air Lease will receive $65 a share in cash from the buyers, which include leasing firm SMBC Aviation Capital, Apollo and Brookfield Asset Management, according to a statement Tuesday. The purchase price represents an 8% premium over Air Lease’s last closing price.
The aircraft leasing sector has seen rising consolidation over the years, led by buyers with significant financing capabilities such as the Japanese and Saudis. Aircraft lessors have picked up an increasing share of the market for jets since the pandemic, as airlines look to finance plane purchases without risking their own balance sheets.
Udvar-Hazy is the biggest individual shareholder in the company, with a stake of about 5.4%.
SMBC Aviation Capital, which is owned by Sumitomo Mitsui Financial Group and Sumitomo Corp., agreed to buy smaller rival Goshawk Aviation in 2022 for $6.7 billion. Leasing giants AerCap Holdings NV, the industry No. 1, and General Electric Co. combined their operations in 2021 in a bet the aviation industry was ready to rebound.
AviLease, a jet lessor owned by Saudi Arabia’s sovereign wealth fund, agreed in 2023 to buy Standard Chartered Plc’s aviation finance business in a deal that also involved Apollo.
Sumitomo Mitsui Financial bulked up in the leasing space in 2012, when Royal Bank of Scotland sold its aviation leasing unit for about $7.3 billion, which at the time marked the biggest disposal by the lender following a government bailout during the financial crisis in 2008.
Air Lease will be renamed Sumisho Air Lease, and its order book will move to SMBC Aviation, the companies said. Including debt that will be assumed or refinanced, the sale is valued at about $28.2 billion. Brookfield and Apollo managed funds will provide capital.
Air Lease has grown to be one of the biggest leasing firms in the world, with 544 aircraft and another 260 on order, according to its website. SMBC is even larger, with 893 planes. Industry leader AerCap has a passenger fleet numbering more than 1,700.
Udvar-Házy, 79, said the transaction represented “the best path forward for our company as it will deliver an immediate premium and certainty in cash value” to shareholders.
The Hungarian-born financier, who founded Air Lease in 2010, helped revolutionize the way commercial aircraft are financed. Over more than a decade, he and longtime business partner John Plueger built the company into one of the largest global players.
The child of immigrants who fled Hungary after the Soviet army quashed an anti-communist rebellion, Udvar-Házy struck his first airplane deal as a 21-year-old economics undergraduate at the University of California, Los Angeles.
In 1973, he co-founded Interlease Group Inc., a forerunner to International Lease Finance Corp., which he eventually built into the world’s largest aircraft leasing firm.
Udvar-Házy sold ILFC to American International Group Inc. in 1990 for $1.3 billion and continued as CEO until the insurance giant was upended by the financial crisis, requiring a US government bailout.
When AIG put ILFC up for sale, Udvar-Házy tried unsuccessfully to buy its planes in 2010, before retiring and founding Air Lease in offices across the street.
He said in March that he planned to retire from Air Lease in the coming months.
–With assistance from Aaron Kirchfeld and Julie Johnsson.