Chinese conglomerate HNA has moved to expand its aviation wing by agreeing to buy Irish aircraft leasing business Avolon for about $2.6bn (£1.7bn, €2.3bn). Bohai Leasing, a unit of HNA, will pay $31 a share in cash as part of the deal that includes the assumption of $5bn of debt, taking its overall enterprise value to $7.6bn.
The price represents an 8% premium on Avolon's closing share price of $28.7 on 3 September, but is lower than Bohai's $32-a-share-bid on 10 August. In a statement, Avolon said the lower price reflected "significant volatility across global equity markets".
Avolon, which went public for $20 per share in New York in December 2014, had been holding talks with Bohai since mid-July. The transaction is expected to close by the first quarter of 2016.
"Avolon has delivered significant returns for all shareholders and we believe Bohai are the right shareholder for the Avolon business in the next stage of growth," Avolon chairman Denis Nayden said. "We believe Bohai will enhance Avolon's profile, positioning and relationships in the Chinese aviation market – a market which we believe offers one of the most compelling growth opportunities in global aviation over the next two decades."
Chris Jin, chief executive of Bohai, added: "We are delighted to announce this agreement to acquire the business. Our vision at Bohai is to build each of our transportation finance businesses into global leaders.
"Avolon has delivered remarkable growth over the past five years to become a leading industry franchise with a distinct business model, and the company is a strong complement to our existing investment in the aircraft leasing sector."
The deal comes amid surging appetite for new aircraft in China's fast-growing domestic aviation sector. "Chinese companies have been growing rapidly in aircraft leasing in recent years," Kazunori Morisaki, an analyst at Japan Aviation Management Research in Tokyo, told Bloomberg.
"China has a very large domestic aviation market, so there is room to have a big aviation leasing industry." Avolon owned and managed 152 aircraft - spread out over 56 airlines in 33 countries - as of June.