AerCap (AER) is off to the races this morning, with shares of AER stock up almost 35% from Friday’s close and now worth more than twice what they were at the start of the year.
The main reason investors were so excited about AER stock this morning? Well, AerCap made a big-time acquisition of a big-time rival. The integrated global aviation company is buying International Lease Finance Corporation from American International Group (AIG) for $5 billion.
That payment will come in $3 billion cash and $2 billion worth of its own shares. AerCap will also assume ILFC’s debt, while AIG will have a 46% stake in AerCap when the deal closers.
AerCap Could Just Keep Climbing
But that’s just the headline. Digging deeper, why is the deal is promising for AerCap investors in AER stock. Well, a few reasons top the list:
- AerCap CEO Aengus Kelly said that the aquisiton of the large AIG unit will “immediately boost earnings,” according to The Wall Street Journal.
- The deal will also make AerCap the global leader in the aircraft leasing industry — and that scale will “offer economic benefits,” according to Kelly.
- The acquisition comes at a significant discount to book value which, “combined with AerCap’s Irish tax domicile, makes the deal highly attractive,” the WSJ added.
Even better for folks who have been AER stock holders for some time? AerCap was doing just fine ever before the deal.
This year started with a slow and steady climb, as AER stock marched from just under $14 on Jan. 1 to just over $20 by mid-December. Then, late last week, news surfaced that AIG was in talks to sell its jet-leasing finance to AerCap. On that rumor alone, AER stock shot up by double-digits.
Now that the deal between AerCap and AIG is final, anyone who has been in AER stock since Jan. 1 has a 145% gain in the books. And anyone who has stuck with AER stock since the depths of the Great Recession has watched shares exploder by over 1,000%.
A few other facts AER stock investors should know about the deal, courtesy of The Financial Times:
- The main aircraft leasing company left for the new AerCap to compete with is Gecas, which is part of General Electric (GE).
- Most of the fleet will be made up of jets made by Airbus and Boeing (BA).
- This deal “represents the final part of AIG’s restructuring following its near collapse during the financial crisis.”
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.