The combined company will be one of aviation leasing’s leading franchises, bringing together complementary portfolios across aircraft, engines, and helicopters. Leveraging 100 years of experience in the market and a pool of expert talent and leadership, the combined company’s broader revenue base, customer diversification, and strong balance sheet will enhance its ability to invest for growth and serve customers through industry cycles.
The transaction simplifies GE and focuses it on its industrial core—Power, Renewable Energy, Aviation, and Healthcare—while significantly reducing GE Capital assets and generating proceeds to further de-risk and de-lever.
For the first quarter of 2021, in connection with signing the transaction agreement, GE will record an approximate $3 billion non-cash charge and report GECAS as a discontinued operation. At closing, the remainder of GE Capital, including Energy Financial Services (EFS) and the company’s run-off insurance operations, will transition to GE Corporate.
This means GE will report industrial-only financials and move from three-column to simpler one-column financial statement reporting.
After the deal closes, GE intends to use the transaction proceeds and its existing cash sources to reduce debt by approximately $30 billion, for an expected total reduction of more than $70 billion since the end of 2018. GE also expects to continue to execute significant additional debt reduction and increase earnings to reach its Industrial leverage target of less than 2.5x net debt to EBITDA over the next few years.
Under the terms of the transaction agreement, which has been approved by the boards of directors of both companies, GE will receive consideration valued at more than $30 billion, including approximately $24 billion in cash, 111.5 million ordinary shares equivalent to approximately 46 percent ownership of the combined company with a market value of approximately $6 billion as of March 9, 2021, and $1 billion paid in AerCap notes and/or cash upon closing.
GE will transfer $34 billion of GECAS’ net assets, including its engine leasing and Milestone helicopter leasing businesses, to AerCap. Current GECAS purchase obligations will transfer to AerCap, and GECAS’ more than 400 employees also will transfer to AerCap upon completion of the transaction.
Under a shareholders’ agreement between GE and AerCap, at closing GE will be entitled to nominate two directors to newly created seats on AerCap’s board. GE will be subject to a staged lock-up agreement allowing it to dispose a portion of its stake after nine months and the entirety of its stake after 15 months. GE also will be subject to a customary standstill and other provisions.
AerCap has secured $24 billion in committed financing from its banking group to support the closing of the transaction. The transaction is expected to close in 9-12 months, subject to AerCap shareholder approval, regulatory approvals, and other customary closing conditions.
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