The Wall Street Journal
By Dana Cimilluca, Ted Mann and Dana Mattioli
Updated Oct. 10, 2014 5:50 p.m. ET
General Electric Co.’s finance arm is negotiating a deal to buy Milestone Aviation Group Ltd., according to people familiar with the matter, as the industrial giant seeks to expand its aircraft-leasing operation into helicopters.
Milestone, co-founded by NetJets Inc. founder Richard Santulli, has announced plans for an initial public offering of stock. It’s not uncommon for a company exploring an IPO to simultaneously explore a full sale. The purchase price for Milestone could be more than $2.5 billion, according to some of the people.
Milestone, founded in 2010, is the world’s largest helicopter-leasing company by fleet value. Private-equity owned Milestone has acquired a $2.2 billion fleet of helicopters and placed orders for around $3 billion more. The company leases helicopters for uses including flying workers and supplies to and from oil platforms, search and rescue and emergency medical services.
GE Capital Aviation Services, or Gecas, as the unit is called, maintains a fleet of more than 1,600 aircraft it leases to airlines, cargo businesses and other customers. Acquiring Milestone would broaden Gecas’s portfolio beyond the competitive plane-leasing business, as it currently owns no helicopters.
Profits in the GE unit fell in 2013 to $896 million from $1.2 billion, on relatively flat sales of $5.3 billion. The aviation-leasing unit reported assets of $45.9 billion, out of $517 billion across GE Capital’s five businesses.
The company is in the midst of an effort to shrink the overall size of GE Capital, which generates significant profits for the parent company but ran into trouble during the financial crisis. GE management has stepped up its efforts to reshape the finance arm in recent years, including through the IPO this year of its consumer-finance business, which backs store-branded credit cards.
That business, rebranded as Synchrony Financial Inc., is to be fully split off from GE in a tax-free transaction next year, which will substantially reduce the company’s exposure to the consumer credit risks that have irked some investors since the crisis.
GE Chief Executive Jeff Immelt and others close to the company remain bullish on other aspects of GE Capital, which remains a critical portion of the parent’s earnings and is on track to contribute $3 billion in dividends to it this year.
The unit intends to continue shedding consumer-related assets while focusing on its “commercial core,” GE Chief Financial Officer Jeffrey Bornstein told investors in July.
The Milestone deal, should it come to fruition, would be the latest sale of an aircraft-leasing operation and could presage more such activity. American International Group Inc. last year agreed to sell control of its big aircraft-leasing business to AerCap Holdings NV for $5.4 billion.
Surging demand for big helicopters from the Sikorsky Aircraft unit of United Technologies Corp. and others has prompted a number of new private equity-backed entrants into the business of renting rotorcraft.
These include Waypoint Leasing, backed by funds linked to the family office of Michael Dell and Soros Fund Management LLC, and Lobo Leasing Ltd., which is backed by Blackstone Group LP.
Analysts have pointed to Waypoint, No. 2 in the helicopter-leasing business after Milestone, as another potential sale or IPO candidate.
—Doug Cameron contributed to this article.
- Source: http://online.wsj.com
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