By Nathan Gomes, Padraic Halpin and Tim Hepher
DUBLIN (Reuters) -A group of investors led by Sumitomo Corp and SMBC Aviation Capital unveiled plans on Tuesday to acquire U.S.-based Air Lease Corp in a $7.4 billion cash deal and bring it under the wing of one of the world’s largest aircraft lessors.
In a four-way deal, Sumitomo and SMBC, the world’s third-largest leasing company, are joining asset managers Apollo and Brookfield to acquire Air Lease through a newly established entity, Sumisho Air Lease Corporation.
Although the new company will remain separate from SMBC Aviation, the deal will bring Air Lease’s fleet under the same umbrella by calling for SMBC to manage the new assets, putting it on a rung close to AerCap, the industry leader.
The company will be based in Dublin, tightening Ireland’s grip on a specialist industry that finances half the world’s airline fleet and has seen a run of mergers in recent years as demand for financing grows to serve growing air travel.
Air Lease shareholders will receive $65 in cash for each Class A common share, a 7.9% premium to the last closing price. The deal, expected to close in the first half of 2026, values the aircraft lessor at about $28.2 billion, including debt.
Shares of Air Lease were up about 6.5% at 1430 GMT.
The deal effectively increases the number of aircraft SMBC owns, manages or has on order – either directly or through its new service agreement with Sumisho Air Lease – to almost 1,800 from 989 currently, SMBC Aviation CEO Peter Barrett said.
That will allow SMBC to regain its position as the world’s second largest lessor from Irish rival Avolon, just behind AerCap, which owns or has on order just over 2,000 jets.
It is the company’s second expansion in three years after it bought smaller leasing firm Goshawk in 2022.
“There has always been consolidation in the aircraft leasing sector, particularly as the industry matures. I expect this to continue,” Barrett told Reuters.
‘PRESSURE ON RETURNS’
SMBC will take over day-to-day management of the Air Lease fleet and pipeline of future orders, backed by the new capital.
The once-obscure jet leasing industry has been a hot destination for investors during an era of cheap money and low returns elsewhere, though experts say the boom is showing signs of slowing down.
“This demonstrates there are still funds taking an interest in the sector and looking for returns,” said aviation adviser Bertrand Grabowski.
“How big these will be remains uncertain as yields have weakened considerably in key segments of the market like sale-and-leaseback,” he said.
A recent boom in second-hand or “mid-life” jets is also faltering. “Airlines are becoming more cautious about increasing capacity; there is too much uncertainty.”
The deal also marks a surprise twist for the empire founded by leasing legend Steven Udvar-Hazy, who set up Air Lease with CEO John Plueger.
Nicknamed the “godfather of aviation”, Udvar-Hazy pioneered the air leasing industry as a student and for many years vied for its leadership with another towering figure, the late Irish aviation tycoon Tony Ryan.
When Ryan’s Guinness Peat Aviation collapsed in 1993 it was split and eventually reconstituted under the current industry leader, AerCap, which later went on to buy Udvar-Hazy’s first leasing company ILFC in a move seen as a comeback for the Irish.
Now, his second foray into the leasing industry will come under the day-to-day control of SMBC, which like AerCap is based in Ireland and was set up by former employees of his rival Ryan.
Udvar-Hazy’s original leasing company ILFC had been sold to insurer AIG in 1990, but he continued to run it until the global financial crisis, when AIG’s financial woes put a strain on ILFC’s ability to borrow money and buy aircraft.
After an unsuccessful bid to buy ILFC back, Hazy stepped down and in 2010 launched Air Lease, which regularly hit headlines with a series of big-ticket aircraft orders from Airbus and Boeing.
In May, he retired as Air Lease’s executive chairman.
Citigroup and Goldman Sachs are advising SMBC Aviation Capital, while Air Lease is working with J.P. Morgan Securities.
(Additional reporting by Abhinav Parmar, Conor Humphries, Anshuman Tripathy; Editing by Shreya Biswas, Shinjini Ganguli and Tomasz Janowski)
