Shares of General Electric Co. (NYSE: GE) traded up more than 2% in Monday’s premarket session on reports that the industrial giant is in talks to sell its aircraft leasing business to Ireland-based AerCap Holdings N.V. (NYSE: AER) in a deal valued at more than $30 billion. AerCap’s shares traded up more than 10% on the report. The talks were reported exclusively by The Wall Street Journal on Sunday.
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GE’s aircraft leasing business, GE Capital Aviation Services, or GECAS, owned 917 airplanes at the end of December, of which 27 with a book value of $600 million were available to lease. The total value of GECAS’s assets at the end of December was $35.9 billion. In 2020, the leasing business contributed $3.95 billion to GE Aviation’s segment revenue but posted a loss of $786 million for the year. That’s the most of any group inside the conglomerate’s GE Capital business.
The deal reportedly under discussion with AerCap is described by sources as both a sale and a merger. Whatever form a final deal takes, it certainly will include a sizable cash payment to GE. Otherwise, there would be no reason for GE to do the deal.
Reported discussions with Apollo Global Management in 2019 included a price tag of around $40 billion for GECAS, but that was before the COVID-19 pandemic.
GE reduced its total liabilities by around $19 billion last year, primarily through sales of its stake in the Baker Hughes oil and gas services business and the $21 billion sale of its biopharmaceutical business to Danaher.
A merger between AerCap and GECAS would combine the top two aircraft lessors in the world. Air Lease Corp. (NYSE: AL), with a market cap of around $5.5 billion, trails AerCap’s $6.6 billion valuation. AerCap’s 2020 revenues totaled around $4.5 billion compared to Air Lease’s $2 billion and GECAS’s reported $3.95 billion.
After Monday’s opening bell, GE shares traded up more than 4% to $14.25, a 52-week high. The 52-week low is $5.48, and the consensus price target on the stock is $12.74.
AerCap shares traded up around 15% to $58.47, also a 52-week high. The stock has traded as low as $10.42 in the past year. Its consensus target is $55.00.
Air Lease traded up more than 3% to $50.72, another 52-week high. The 52-week low is $8.41. The consensus target is $52.43.
Air Lease pays a dividend yield of 1.33%. AerCap does not pay a dividend, and GE’s dividend is $0.04 per year.
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