GE (General Electric) said it will sell its aircraft leasing business to rival AerCap in a deal equivalent to $30 billion, creating a giant leasing group as the aviation market struggles with the coronavirus pandemic.
GE is also trying to reduce its debt load through the deal, which will give GE a 46% stake in the resulting company, which will generate revenues of up to $24 billion, and when the deal closes, which GE expects to take between 9 and 12 months, the company will fall under the larger corporate structure and will not be considered a separate company in financial reporting.
GE said it will reduce its debt by $30 billion using the proceeds of the transaction after its closing and the cash it has. The shares of AerCap and GE fell about 6% after the deal was announced, and the two companies are considered one of the most important customers of both Boeing and its competitor Airbus, and the resulting company will give itself the ability to pressure in negotiating aircraft prices in conjunction with the need of Boeing and Airbus to work during the ongoing pandemic crisis.
The Irish company, AerCap, which is traded on the NYSE Stock Exchange, has a market value of $7.27 billion as of Tuesday’s closing price, and its shares are up 4% this week after the two companies were reported to be close to striking a deal together.
According to last year’s statistics for GE Capital, its Gecas services unit, which has been scaled back since the start of the financial crisis, went from making a profit of $1.03 billion a year ago to incurring a loss of the remaining $786 million, while AerCap posted a net loss of $299 million last year after it achieved profits of more than 1.1 billion dollars in 2019, which in its fourth quarter alone achieved about 28.5 million dollars.