GE NEARS DEAL WITH AERCAP

GE to combine unit with AerCap

General Electric nears a deal to merge its jetleasing business with AerCap Holdings.

General Electric Co is nearing an agreement to combine its jet-leasing business with Ireland’s AerCap Holdings NV, according to people familiar with the matter, in a potential deal that would join the world’s two biggest aircraft financiers in a market roiled by the coronavirus pandemic.

“A transaction may be announced as soon as Monday,’’ said one of the people, who both asked not to be named discussing the matter.

The deal is expected to have a value of more than $30 billion, said The Wall Street Journal, which reported the talks earlier on Sunday.

Between them, GE Capital Aviation Services, or Gecas, and AerCap have almost 3,000 aircraft owned, managed or on order.

A combination would speed GE chief executive Larry Culp’s push to streamline the US industrial icon after an epic corporate meltdown.

While terms of the potential agreement with AerCap are unclear, a sale of Gecas could garner GE about $25 billion, Bloomberg Intelligence said in a report in 2019.

Last year, GE completed the sale of its bio-pharmaceutical business to Culp’s former employer, Danaher Corp, for $21.4 billion.

A deal could be a “win-win situation” for both the companies and the airline industry, said Mark Martin, founder of Dubai-based Martin Consulting LLC, which advises the aviation industry.

“Clearly GE and AerCap see renewed interest for engine refinance and engine leasing. This is being done in the backdrop of a post-Covid recovery. The industry has to rebuild itself so in a way this is also uniquely positioned with softening the blow on airlines,” he said.

GE declined to comment, and AerCap representatives couldn’t immediately be reached for comment outside regular business hours on Sunday.

AerCap, based in Dublin and listed on the New York Stock Exchange, has a market value of $6.6 billion. The shares advanced 11% this year through March 5 after a 26% drop last year. GE has jumped 26% this year following a 3.2% decline in 2020.

The pandemic has hammered the aviation industry and pushed airlines around the world to cancel new jetliner orders, push back delivery dates and defer lease payments. But a combination would be likely to receive scrutiny from antitrust authorities, other regulators and business partners, given the weight of the two companies in global aircraft finance.

For GE, a tie-up would extend a shift away from the company’s longtime business model of using its powerful leasing platform to generate sales of commercial aircraft powered by the company’s jet engines.

GE’s finance arm has been significantly pared back since it nearly crippled the company during the 2008 financial crisis.

“The old world where you needed a leasing a company to support your manufacturing is gone,” Bloomberg Intelligence analyst George Ferguson said. “For AerCap, this could be something that’s too good to refuse.”

A deal with Gecas would likely elevate the profile of Aengus “Gus” Kelly, AerCap’s hard-charging CEO.

He emerged on the global stage in 2014 with AerCap’s $7.6 billion acquisition of leasing pioneer ILFC from American International Group.

“By pooling assets, the new entity may be able to access the capital markets more cheaply than Gecas could acting under GE’s corporate umbrella,’’ Ferguson said.

Gecas had about $35.9 billion in assets at the end of last year, with about 1,650 aircraft owned, serviced or on order.

AerCap, with assets of $42 billion, owned 939 aircraft and managed 105, according to a regulatory filing. It also had 286 planes on order, including jet models such as the Airbus A320neo and Boeing 737 MAX.