It is now confirmed that Dubai Aerospace Enterprise (DAE) is acquiring Dublin-based AWAS, which will more than double the size of DAE’s leasing platform. DAE signed a definitive agreement to buy AWAS from Terra Firma Capital Partners and Canadian Pension Plan Investment Board (CPPIB) today.
“This acquisition of AWAS is strategically compelling and propels DAE into a top 10 aircraft leasing platform,” DAE Managing Director Khalifa H. AlDaboos said in a statement this morning.
DAE had 112 aircraft on its books at the start of the week, combined with AWAS’ 263 owned, managed and ordered aircraft it will now have an owned, managed and committed fleet of 375 aircraft spread over 110 airline customers in 55 countries with 23 aircraft on order to be delivered before the end of next year.
DAE stated that the transaction will be financed by the group’s internal resources and committed debt financing. The deal is subject to regulatory approvals and is expected to be completed in the third quarter of this year.
DAE was advised by Morgan Stanley and Freshfields Bruckhaus Deringer, KPMG and Latham and Watkins. Goldman Sachs and Milbank acted for AWAS/Terra Firma. The deal is subject to regulatory approval and is expected to close in Q3 2017.
The big question is whether Guy Hands received the full $7 billion, including debt, that he was after for AWAS and whether this is the end of the line for CPPIB?
Given that all other lessors had pulled back and the only one left was a sovereign wealth backed-operation (in effect), it is likely that Guy Hands and co did manage to secure the deal they wanted. A price in the $6bn region might be seen as expensive but that is where other lessors were pulling back. If anything north of $6bn was achieved, then overnight other lessors will be able to revise the value of their business upward (again) by some margin. As they do, they can also count on the CPPIB to come back into the market and as such this deal today is great for the entire aircraft leasing sector and another lessor somewhere is going to win out of this.
Ryan Selwood, Managing Director, Head of Direct Private Equity, CPPIB, commented: “We are pleased with the outcome of this transaction. We continue to believe that the aircraft leasing industry is a highly-attractive market for CPPIB over the long term and look forward to exploring future opportunities to invest in the sector at scale, subject to market conditions.”
Guy Hands also expressed his delight with the finalisation of the deal, adding that, “this is the right time for Terra Firma to realize maximum value for our investors. Under our ownership, we have transformed the company to better reflect the fast-changing market that it serves. This has been achieved through an active aircraft acquisition and disposal strategy to optimize the business’s portfolio and align with its diverse customer base.
He adds: “In 2015 we began a two-part disposal process to position the business for exit. The asset-backed sale of 30 aircraft was an innovative approach to the disposal of older aircraft, while our decision to sell a large portfolio of 84 aircraft to Macquarie Group Limited helped us to optimize the business’s portfolio size ahead of the final exit. We are proud to have built a better business which can go on to further success under new ownership, having created value for our investors.”
The only remaining question is whether Guy Hands will be glad to see the back of the aviation sector or will he instruct his team to look out for another opportunity in the space? His comments over the past few years have left the feeling that he would not get back into aircraft leasing ever again, but surely all that experience and insight must not be left to fade away? For now this is the final part of a story that started with ANSETT forming AWAS from an aircraft deal with TNT/Rupert Murdoch in the 1980s that ended up in the hands of Terra Firma in 2006, almost at once taking on Pegasus Aviation Finance along the way. Given the price paid for AWAS and Pegasus, was this investment a winner for Terra Firma? If the price paid by DAE was over $6bn then Terra Firma would have exited with distinction (just if below $6.3bn); below that and investors might question the whole enterprise over the past decade.Date: April 24, 2017