Avolon $2.5bn sale to Bohai seems smart

China’s Bohai Leasing has won the race to buy Dublin-based aircraft lessor Avolon with an offer valued at around $2.5 billion. They agreed the sale on Thursday night, less than nine months after the Irish company floated on the New York Stock Exchange.

The $31 a-share price is less than the $32 indicative offer on which the two began exclusive talks last month, but it is still ahead of the $30 tabled by Bohai’s rival in the race, another Chinese player, Avic, earlier in the summer. It is also 55 per cent more than Avolon’s $20 flotation price.

The reduced final offer is down to the recent volatility in world equity markets, triggered by investors’ concerns over the reduced momentum in China’s economic growth.

China is one of a number of Asian countries that aircraft lessors, Avolon included, believe will deliver strong growth. Its huge size and one billion-plus population means that there should be big internal demand for aircraft, while its continued growth and trade with the rest of the world imply a need for greater connectivity and thus more planes.

Whether recent events will actually change those fundamentals remains to be seen. Bohai’s and Avic’s interest in Avolon is more likely to have been driven by what the company itself has done, and is likely to do, than by anything happening in their home country. Putting it simply, they presumably believed that it represented a good deal.

Avolon’s backers obviously agree. Its long-standing institutional investors, Cinven, CVC Capital and Oak Hill Capital have already pledged to vote in favour of the Bohai deal at a general meeting of shareholders.

It is unlikely that, when Avolon floated on the New York market last December, either they or the company’s chief executive, Dómhnal Slattery (pictured), thought they would be agreeing to a sale less than nine months later. Given everything that’s happened to equity markets over the last few weeks, selling now seems smart.