Aerospace & Defense

GE Talks $30 Billion Deal for Aircraft Leasing Unit

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.

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.