This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Market Applauds AIG's Second Attempt to Sell ILFC

NEW YORK ( TheStreet) -- Investors were thrilled with the announcement by American International Group (AIG - Get Report) on Monday of a $5.4 billion deal to sell International Lease Finance  Corp to AerCap Holdings  (AER - Get Report).

Shares of AIG were up 2% in the first minutes of trading to $50.70, while AerCap's stock shot up 35% to $33.71.

AIG agreed to sell 100% of its aircraft leasing subsidiary -- which the company describes as a "non-core asset" to AerCap for $3 billion in cash, plus "97,560,976 newly issued AerCap common shares," bringing the deal's value to $5.4 billion, based on AerCap's closing price of $$24.93 on Friday.

The deal is expected to be completed during the second quarter of 2014, and will leave AIG holding 46% of AerCap's common shares.

The agreement is subject regulatory approvals and to a vote by AerCap's shareholders, however AIG said "Waha Capital, AerCap's largest shareholder with a current stake of 26%, has agreed to vote in favor of the transaction."

AIG's net cash benefit from the transaction is expected to be $2.4 billion, "after the settlement of intercompany loans."

This is AIG's second effort to sell ILFC, following an agreement in December 2012 to sell an 80.1% stakte in in the unit for $4.2 billion in cash to an investor group led by Weng Xianding, the chairman of New China Trust Co. Ltd. The investor group had an option to purchase up to 90% of ILFC. Despite an extension to the "walk away" date, the investor group never followed through to complete the deal. 

"ILFC is a valuable business, and AIG has always taken great pride in ILFC's reputation for innovation, its pioneering role in aircraft leasing, its industry-leading team of employees, and its consistent and successful market leadership. The combination of AerCap's young fleet of in-demand aircraft and proven portfolio management capabilities with ILFC's attractive order book and broad marketing reach will continue to lead the industry," said AIG CEO Robert Benmosche said in a press release. "However, as we have said all along, the aircraft leasing business is not core to our insurance operations. Upon completion, the transaction will have a positive impact on AIG's liquidity and credit profile and will enable us to continue to focus on our core insurance businesses," he added.

AerCap CEO Aengus Kelly said in the same press release that his firm's "acquisition of ILFC will create the leading global franchise in the aircraft leasing industry."  He also said the deal would leave AerCap with "the most attractive order book in the industry."

Sterne Agee analyst John Nadel in a note to clients Monday morning called AIG's deal with AerCap "a solid outcome for buyer and seller." 

The big pop in AerCap's shares also bodes well for AIG, but the insurer will have to wait to sell its AerCap shares.  Based on his research team's review of the agreement documents, "it appears AIG will be subject to staged lock-up whereby it can sell roughly one-third of its stake in AER after 9, 12 and 15 months post closing," according to Nadel.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AER $41.03 1.30%
AIG $59.11 0.65%
AAPL $112.06 4.00%
FB $89.72 2.90%
GOOG $613.55 2.60%

Markets

Chart of I:DJI
DOW 16,351.38 +293.03 1.82%
S&P 500 1,948.86 +35.01 1.83%
NASDAQ 4,749.9790 +113.8740 2.46%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs