Bank of China Ltd (BOC), China's second-biggest bank, said it
will buy all shares of Singapore Aircraft Leasing Enterprise for
US$965 million, the first major acquisition made by a state-owned
bank.
BOC will buy 100 percent of Asia's largest plane lessor from the
existing shareholders and assume US$2.28 billion of debt, according
to its press release. The price represents 1.8 times to the
company's equity value of US$535 million as of September 30.
China's commercial airline fleet flew 133 million people, more
than the population of Japan, in the first 10 months of this year
and will probably more than triple in size to 3,900 planes in the
next two decades, according to Boeing Co. Leasing aircraft lets
airlines expand and replace aging planes quicker with less of their
own money.
"In the long run, there must be some sort of aircraft leasing
company to serve the country's demand," said Winson Fong, who helps
manage about US$2.3 billion of assets at SG Asset Management in
Singapore. "Aircraft leasing will grow along with the fleet
expansion in China."
BOC said the acquisition is part of its strategy to diversify
into non-interest income, and will provide a platform for it to
expand into aircraft leasing. The lender will also get
cross-selling opportunities with airline companies.
"BOC will leverage on its global client resources and
institutional network in China and overseas to support Singapore
Aircraft's global business development, and particularly in the
Chinese aviation sector," the bank said.
The Chinese lender said it will appoint directors to the board
of Singapore Aircraft, which will be run by the company's existing
management based in Singapore. Robert Martin will remain the
company's chief executive officer.
Singapore Aircraft said in September it wants to increase the
number of planes it operates for airlines, earning management fees
in addition to lease payments. The company manages 14 planes for
third parties out of a fleet of 77, and has 28 planes on order. It
also has an option to buy 20 additional aircraft, the statement
said.
BOC wants to expand into plane leasing and has an agreement with
Royal Bank of Scotland Plc, which holds about 4.4 percent of the
Beijing-based bank, to develop aircraft finance.
(China Daily December 16, 2006)