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Cinven sells Avolon to Bohai leasing in USD7.6 billion deal

European private equity firm Cinven has exited its investment in Avolon following completion of the acquisition of the international aircraft leasing company by Bohai Leasing Co, the Chinese leasing business and part of HNA Group, for USD7.6 billion. 

Bohai and Avolon have reached a definitive merger agreement at a price of USD31 cash per common share, representing a 55 per cent premium to Avolon’s initial public offering (‘IPO’) on the New York Stock Exchange in December 2014, at USD20 per share.
 
Cinven, along with its partners, created Avolon in May 2010 with an enterprise value of USD1.4 billion including equal equity commitments totalling USD750 million from Cinven and two other private equity firms.  Cinven achieved a partial realisation of its shareholding in Avolon following the Group’s successful IPO, after which Cinven retained 14 million shares representing a 17.3 per cent shareholding in the Group.
 
In 2009, the Cinven Financial Services team identified the aircraft leasing sector as an attractive market with long-term structural growth characteristics, despite suffering from short-term dislocation following the collapse of Lehman Brothers. In 2010 Cinven invested in Avolon, backing the incumbent management team led by Domhnal Slattery.
 
During Cinven’s ownership, Avolon has grown from a portfolio of 26 aircraft in 2010 to 260 aircraft today with a customer base of 56 airlines across 33 countries. Since 2011, its revenues and EBITDA have increased by over fivefold to USD697 million and USD582 million respectively to the 12 months to June 2015. 
 
Caspar Berendsen (pictured), Partner in Cinven’s Financial Services team, says: “The financial crisis in 2008/9 led to an attractive investment opportunity in the aircraft leasing sector; some of Avolon’s major competitors were no longer active in the market – due to structural issues with their parent companies – but there remained strong market demand from airlines to lease aircraft, in particular the latest narrow-bodied fuel efficient aircraft provided by Avolon.
 
“Cinven’s Financial Services team identified and backed a highly talented and experienced management team, led by Domhnal Slattery, to create Avolon. We have worked closely with the team to internationalise the business, with particular involvement from our Portfolio team in Asia, and to ensure the Group had committed capital in place to fund further growth. The strong performance of the Group reflects both the quality of Avolon’s franchise and the ongoing level of demand for leased aircraft. The acquisition by Bohai is testament to the success of Avolon and we wish them every success.”
 
This transaction is subject to customary conditions including receipt of certain required regulatory approvals and the approval of Avolon and Bohai’s shareholders. The transaction is expected to close in the fourth quarter of 2015. 

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