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 The insurer, which was nearly wiped out by derivative bets during
the financial crisis, put International Lease Finance Corp on the
block after receiving a $182 billion government bailout package in
2008. AIG repaid the rest of the money owed to the U.S. Treasury in
March, but still wanted sell ILFC as part of its efforts to focus on
insurance.
As part of the cash and stock deal, AIG will end up holding a nearly
46 percent stake in AerCap for at least nine months after the deal
closes. But the move nevertheless rids AIG's balance sheet of ILFC's
debt and aircraft purchase commitments, and allows the insurer to
focus on its property-casualty and life insurance operations.
The deal will give AerCap, a Netherlands-based lessor, a fleet of
1,329 aircraft — the second largest after General Electric's <GE.N>
aircraft leasing division GECAS, which owns and services 1,630
aircraft.
The deal will result in annual operational cash flow of $3 billion
and savings of about $100 million a year by the end of 2015, AerCap
Chief Executive Angus Kelly said in a call with analysts.
AerCap's shares rose more than 35 percent following news of the deal
and were up 30.5 percent at $32.53 late Monday afternoon. AIG shares
edged up 1 percent to $50.23 on the New York Stock Exchange.
"It's a good transaction for AIG," said Clifford Gallant, an analyst
with Nomura Equity Research, a division of Nomura Co Ltd <9716.T>.
"It gets to retain 46 percent, so they get a future earnings stream
from the company. ... It simplifies AIG's balance sheet, enabling
them to do things like buy back stock or have more capital
flexibility."
The deal comes almost exactly a year after AIG announced it was
selling a 90 percent stake of ILFC to a group of investors based
mainly in China for $4.7 billion. That deal valued ILFC at about
$5.3 billion.
But last spring, the consortium was late with a payment for the
business, raising concerns about whether the deal would close.
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By late summer, AerCap began lining up financing to strike a deal to
buy ILFC, according to three people familiar with the situation who
are not authorized to speak to the media.
Under the terms of the deal, AIG will get $3 billion in cash and
97.56 million new common shares of AerCap, giving the deal a value
of $5.4 billion based on AerCap's closing share price on Friday.
The insurer can begin selling its stake in AerCap in stages over a
nine- to 15-month period after the deal closes. The deal is expected
to close in the second quarter.
But while AIG will retain a stake in AerCap for some time, the deal
enables the insurer to wipe $21 billion in debt associated with the
business off its balance sheet. Net cash proceeds to AIG at closing
are expected to be around $2.4 billion.
UBS <UBSN.VX> was the financial adviser to AerCap while Goldman
Sachs <GS.N> was the financial adviser to AerCap's board.
Citigroup <C.N> was the lead financial adviser to AIG, and Morgan
Stanley <MS.N> and JPMorgan Chase & Co <JPM.N> also advised on the
deal, an AIG spokesman said.
(Reporting by Avik Das in Bangalore;
editing by Saumyadeb Chakrabarty and Richard Chang)
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