AirAsia group CEO Tan Sri Tony Fernandes says the initial share sale plans of the Indonesia and Philippines units are proceeding well.
KUALA LUMPUR: AirAsia Bhd is selling its aircraft leasing operations to BBAM Ltd Partnership for US$1.185bil (RM4.619bil) under its strategy of disposing non-core assets and businesses and focus on its core operations.
Its unit Asia Aviation Capital Ltd's aircraft leasing operations have an enterprise value of US$2.846bil (RM11.096bil).
The low-cost carrier said on Thursday it expects to recognise a gain on sale of about RM967.1mil, which analysts were expecting to return to shareholders in the form of dividends.
Under the deal, Asia Aviation Capital is selling its portfolio of 84 aircraft and 14 engines – of which 79 aircraft and 14 engines will be leased back to AirAsia and its affiliates.
BBAM Ltd Partnership (BBAM) is one of the world’s largest dedicated managers of investments in commercial jet aircraft.
Under the corporate exercise, FLY Leasing Ltd (FLY), Incline B Aviation Ltd Partnership (Incline) and Nomura Babcock and Brown (NBB) will acquire a portfolio of 84 aircraft and 14 engines of which 79 Aircraft and 14 engines will be leased back to AirAsia and its affiliates.
FLY and Incline also entered into agreements to acquire 48 aircraft to be delivered to AirAsia Berhad and an option to acquire a further 50 aircraft to be delivered.
As part of the disposal consideration, AirAsia Berhad will also receive non-cash considerations comprising of US$50 million in FLY American Depositary Shares (ADSs), resulting in AirAsia Berhad owning approximately 10.2% of FLY.
AirAsia will also commit US$50mil into Incline Parallel Funds, which will invest alongside the Incline Aviation Master Fund in global aviation investments.
AirAsia Group CEO Tan Sri Tony Fernandes said: “Today’s sale is much in line with our stated strategy of disposing non-core assets and businesses, an undertaking which we have successfully executed over the last six months – starting with our training centre, ground handling unit and now our leasing unit – and unveiling the true value of AirAsia.
“When we bought these planes, our gearing was high and some people could not see why we wanted to own these assets. This deal shows it was the right strategy as we have something of value to dispose in return for cash and an equity relationship in two great companies, while removing residual risks.
“This is a perfect outcome to a strategy we started in 2004 and I’m thrilled at the execution of our longterm vision. We have now disposed of most of our physical non-core assets and we are thrilled to be embarking on our new digital strategy which will build a very valuable group of assets.”
He added: “The AirAsia Group is delighted to begin this new, long term partnership with Steve and the rest of the team at BBAM and FLY. Steve had the vision and courage to take over BBAM and build a very respectable leasing business with many great professionals. In many ways their DNA is similar to ours and that attracted us into this partnership. We look forward to working together for many years to come.”
BBAM CEO Steve Zissis said, “Tony and his team have built an incredible business at AirAsia and we feel fortunate in having this opportunity to build a long-term partnership with an organization of this caliber.”
Credit Suisse, BNP Paribas and RHB are acting as joint financial advisors, and Milbank and ZICO are acting as counsels to AirAsia.
Trading in AirAsia was suspended in the morning session. It resumes trading at 2.30pm.
Its last traded price was RM4.38, which means it is trading at a price-to-earnings ratio of 9.22 time. Its forward P/E is 9.95 times.
Most analysts are upbeat on AirAsia, with KAF Seagroatt & Campell having a buy with a target price (TP) of RM5.20 while Credit Suisses and Kenanga Research have an outperform with RM5.30 and RM5.25 as the TP.
However, JP Morgan has an underweight with a TP of RM2.90.
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