By Robb M. Stewart
MELBOURNE, Australia--Australia's Macquarie Group Ltd. has
struck a deal to buy a portfolio of 90 commercial airliners for $4
billion, bolstering its aircraft-leasing business and further
diversifying away from its investment-banking roots.
The bank said it had agreed to buy the aircraft from AWAS
Aviation Capital Ltd., owned by private-equity firm Terra Ferma and
the Canada Pension Plan Investment Board. To help fund the
purchase, Macquarie said it planned to raise as much as 500 million
Australian dollars ($391 million) by issuing new shares.
Macquarie was once one of the world's most acquisitive firms,
bidding on everything from the London Stock Exchange to European
airports. However, its business model took a battering after the
global financial crisis triggered a sharp increase in the cost and
availability of debt used to fund its deal spree.
In recent years, Macquarie has shifted its focus away from
riskier exposures to more reliable asset-management, financing and
commercial banking operations to cushion volatility in its
investment-banking and trading units. The firm has also cut costs
in poorer-returning businesses.
Macquarie, which began as a subsidiary of London merchant bank
Hill Samuel & Co. and opened its first office in Sydney in
1970, last month said trading conditions across its operations had
continued to improve and it expected profit to increase by up to
20% this financial year through June. Its
corporate-and-asset-finance business had seen further improvement
in its lending and asset portfolios, which increased by about A$1.5
billion to A$29 billion in value in the three months through
December.
Macquarie is buying aircraft leased to 40 airlines, with an
average 6.5 years remaining on each contract. The portfolio
includes mainly modern narrowbody Airbus A320-200 and Boeing Co.
737-800 aircraft, along with some Airbus A330 widebody jets.
The acquisition will increase the number of aircraft that
Macquarie owns to 220, leased to 94 airlines, and lifts the value
of the portfolio to A$9.5 billion. It comes five years after
Macquarie spent $2 billion to buy a portfolio of 53 aircraft from
U.S. insurer American International Group.
Nicholas Moore, Macquarie's managing director and chief
executive, said the latest deal with Dublin-based AWAS strengthens
the bank's position in the aircraft-leasing market while also
growing its annuity-style business.
Terra Firma owns 75% of AWAS, while Canada Pension Plan
Investment Board, Canada's largest pension fund, owns the remaining
25% stake.
Macquarie said the deal with AWAS, which was known as Ansett
Worldwide Aviation Services until mid-2004, will be funded from
existing cash and loans, third-party financing and the
institutional placement of new shares. The raising takes advantage
of a 25% rise in Macquarie's share price since the start of this
year, as investors have sought out investments with higher dividend
yields, including the country's big banks, amid record-low interest
rates in Australia.
Macquarie said it expects the deal to boost earnings per share
by about 5% in the first full year of ownership, while net profit
should rise by about A$115 million annually on average over five
years.
Terra Firma and Canada Pension Plan Investment Board separately
said the company will continue to own and maintain the core of its
remaining portfolio of more than 200 aircraft and that it plans to
expand its fleet through acquisitions and sale-and-leaseback deals
with airlines.
"Given the nature of the AWAS portfolio and current market
conditions, we saw a good opportunity to generate value for our
investors," said Guy Hands, chairman and chief investment officer
of Terra Firma.
Write to Robb M. Stewart at robb.stewart@wsj.com
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