HNA Group’s second bid for AWAS rejected by Terra Firma

Unconfirmed news has been disclosed by two separate sources that British private equity firm, Terra Firma, has rejected a second offer for its leasing group AWAS by China’s HNA Group. This comes after HNA had successfully acquired Avolon Holdings last year via its leasing arm, Bohai. It is understood the figure paid for Avolon was US$7.6 billion.
According to these sources, an original offer of US$2 billion, which reflected the company’s underlying book value, was rejected last year, while the more recent offer was placed at approximately 10% above book value. This goes very much against the norm based on Thomson Reuters’ data, where listed aircraft leasing companies have been traded at 0.82 times their book value.
The current bid level is believed to be US$7.2 billion, though when asked for comments, HNA denied any knowledge of the AWAS bid and Terra Firma refused to comment.
With current low interest rates, aviation assets have become a target for investment fund and insurance company investment who are attracted to the prospect of long-term and dollar-based steady returns. It has been seen that what has become a rapidly growing Dublin-based industry, aircraft leasing has witnessed increased consolidation with keen interest being shown from Asia, partly due to current record-level aircraft orders. Earlier this week Nordic Aviation Capital, the Denmark-based and largest turboprop aircraft lessor made it clear they intended to expand through the acquisition of Jetscape Aviation which is based in Florida, USA.
HNA Group wants the recent acquisition of Avolon to provide a point of entry to challenge the top-three companies in aircraft leasing, Dutch-based AerCap (AER.N), General Electric’s (GE.N) GECAS and SMBC Aviation Capital. The latter Japanese-owned firm has also been reported to be interested in AWAS, though when asked, the company declined to comment.