Furthering its efforts to reduce debt and strengthen its core businesses, General Electric Co. (GE, Financial) announced on Wednesday it is selling its GE Capital Aviation Services division to AerCap Holdings NV (AER, Financial).
The $30 billion deal will create a massive lessor in the aviation industry, which has been struggling throughout the Covid-19 pandemic on reduced travel demand.
According to the terms of the agreement, the Boston-based industrial giant will retain a 46% stake in the combined aircraft leasing company and receive about $24 billion in cash. For its part, GE will transfer $34 billion worth of GECAS' net assets, including its engine leasing and Milestone helicopter leasing businesses, to the Irish company along with purchase obligations and more than 400 employees.
In a statement, Chairman and CEO Lawrence Culp noted the deal "marks GE's transformation to a more focused, simpler and stronger industrial company."
"Coupled with our continuing efforts to strengthen GE's performance, operations, and culture, this deal brings GE closer to our future—delivering value for the long term and leading the energy transition, precision health and the future of flight," he said. "AerCap is the right partner for our exceptional GECAS team. Bringing these complementary franchises together will deliver strategic and financial value for both companies and their stakeholders."
GE said it will use the proceeds of the sale along with existing cash to pay down $30 billion in debt. Following the deal's close, which is expected to occur within the next nine to 12 months, the company will also be allowed to nominate two directors to newly created seats on AerCap's board.
Aengus Kelly, CEO of AerCap, also expressed his excitement for the "opportunity to bring together two leaders in aviation leasing."
"AerCap and GECAS both have industry-leading teams, attractive portfolios, diversified customer bases and order books of the most in-demand new technology assets," he said. "This combination will enhance our ability to provide innovative and attractive solutions for our customers and will strengthen our cash flows, earnings and profitability."
Following the announcement, shares of GE and AerCap both fell over 5%. On Wednesday, GE was trading at $13.28 per share, while AerCap shares were at $52.72. Year to date, GE's stock has gained 22.92% and AerCap has climbed 15.66%.
Disclosure: No positions.
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