Mitsubishi UFJ Lease & Finance Co. agreed to buy
Oaktree Capital Group LLC (OAK)’s Jackson Square Aviation LCC for 100
billion yen ($1.3 billion) to add about 70 planes to its
commercial-aircraft fleet.
The purchase will be completed
in December, Tokyo-based Mitsubishi UFJ Lease said in a statement
today. The lessor, an affiliate of Mitsubishi UFJ Financial Group Inc.
(8306), Japan’s biggest publicly traded bank, will do the deal by buying
Jackson Square’s parent JSA International Holdings LP.
Japanese
banks are targeting plane-leasing and expansion overseas as a shrinking
population saps demand at home and because a stronger yen has made
foreign assets cheaper to buy. Sumitomo Mitsui Financial Group Inc.
(8316) completed the $1.2 billion purchase of Royal Bank of Scotland
Group Plc’s plane-leasing unit in June.
“Expansion prospects in
Japan are limited,” said Shiro Yoshioka, a Tokyo-based analyst at
Japaninvest Group Plc. “The stronger yen is also helping boost
purchasing power.”
Jackson Square has 76 planes valued at more
than $4 billion, the San Francisco-based lessor said in a statement. The
jets are in service with carriers including Air France-KLM Group (AF),
Emirates and Virgin America Inc., according to aviation- data provider
Ascend. The company’s fleet is predominately narrow-body Boeing Co. and
Airbus SAS planes, Ascend said.
Management Team
The lessor
has “at the core of its business, a management team with expertise in
the industry,” Mitsubishi UFJ Lease said. Jackson Square, named after
the San Francisco district where it’s based, began operating in 2010
after Oaktree committed $500 million in equity to Richard Wiley, Toby
Bright and Scott Weiss.
The trio founded Pegasus Aviation Finance
Co., sold it in 2007 to Terra Firma Capital Partners Ltd. and then
created Sky Holding Co., which was renamed Jackson Square with Oaktree’s
involvement. Wiley had worked with Oaktree since the mid-1990s, doing
more than $6 billion in aircraft transactions through Pegasus. Bright
had been Boeing’s commercial-plane sales chief.
“Having the
support of another major international financial services company
enables us to continue to provide our airline customers with new capital
to finance their next- generation deliveries,” Wiley said in the
statement.
Mitsubishi UFJ Lease owns four Boeing planes, according
to Ascend. The company leases assets including machine tools,
computers, cars and real estate, according to its website.
Shares Rise
The
lessor jumped 3 percent to 3,395 yen at the close in Tokyo. The shares
have gained 11 percent this year. Mitsubishi UFJ Financial holds a 9.2
percent stake, according to data compiled by Bloomberg.
The deal
“is in line with Mitsubishi UFJ Financial Group’s business strategy to
expand global assets,” said Hironori Imafuku, a spokesman for the
Tokyo-based bank. Leasing “is one of our business pillars in addition to
banking, brokerage, trust banking and credit-card services.”
Japanese
companies announced $51.7 billion of overseas takeovers last year,
according to data compiled by Bloomberg. This year, $31.1 billion of
deals have been announced, led by Marubeni Corp.’s $5.6 billion purchase
of U.S. grain merchandiser Gavilon Group LLC. The yen has gained 6
percent against the dollar in the past two years, according to data
compiled by Bloomberg.
Lease Expansion
The jet-leasing
industry has been growing since its birth in the 1970s, and about 35
percent of the global fleet is now leased rather than owned, up from 25
percent in 2000, according to a Fitch Ratings report in July. Airlines
will take 34,000 new planes valued at $4.5 trillion through 2031,
according to Boeing. That’s a 1.5 percent increase from a 33,500-jet
estimate a year earlier.
Jackson Square specializes in
sale-leaseback deals, functioning as a third-party financier. In such
transactions, airlines order jets, getting discounts off the purchase
price, and then seek to preserve cash by selling the planes to lessors
and signing operating leases instead.
Competitors include units of
General Electric Co. (GE), American International Group Inc. (AIG) and
CIT Group Inc. (CIT), as well as independent companies such as Air Lease
Corp. (AL) and AerCap Holdings NV.
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