AerCap to acquire ILFC

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AerCap has agreed acquire 100% of the common stock of ILFC, a wholly-owned subsidiary of American International Group, in a $26 billion deal funded by UBS and Citibank.

As part of the transaction, AIG will provide AerCap with a committed five-year $1 billion unsecured revolving credit facility.

The transaction is expected to close in the second quarter of 2014.

Under the terms of the agreement, AIG will receive $3 billion in cash and 97,560,976 AerCap shares.

The combined company will retain the name AerCap, and ILFC will become a wholly-owned subsidiary of AerCap.

In connection with the transaction, AIG will be entitled to nominate two directors for election to the board of directors of AerCap.

Based on the closing stock price of AerCap's shares on Friday,13 December, the total consideration has a value of approximately $26 billion including the assumption of the outstanding ILFC net debt of $21billion.

Upon closing of the transaction, AIG will own approximately 46% of the combined company, while the existing AerCap shareholders will own approximately 54% of the combined company.

The AIG shares will be subject to a lock-up period which will expire in stages over a 9- to 15-month period, post closing of the transaction. In connection with the acquisition, AIG has entered into agreements with AerCap regarding voting restrictions, standstill provisions and certain registration rights.

In connection with the transaction, AerCap and AIG will make an election under Section 338(h)(10) of the Internal Revenue Code that will enable AerCap to step up the tax basis of ILFC's aircraft and other assets to their fair market value.

AerCap's chief executive officer Aengus Kelly says: "AerCap's acquisition of ILFC will create the leading global franchise in the aircraft leasing industry. This transaction presents a unique strategic opportunity to bring together the outstanding and experienced personnel from both companies and two attractive portfolios of modern aircraft on lease to a highly diversified customer base."

The transaction is subject to approval by AerCap shareholders, receipt of necessary regulatory approvals and satisfaction of other customary closing conditions.Waha Capital, AerCap's largest shareholder with a current stake of 26%, hasagreed to vote in favor of the transaction.

UBS acted as the lead financial advisor to AerCap. Goldman Sachs acted as sole financial advisor to AerCap's board of directors.