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- Standard Chartered expects to make a gain of about $300m from the takeover
- Riyadh-based AviLease is owned by Saudi Arabia’s Public Investment Fund (PIF)
- Completion of the acquisition is set to be finalised towards the end of 2023
Standard Chartered has agreed to sell its aviation finance leasing arm to a unit of Saudi Arabia’s sovereign wealth fund for about $3.6billion.
The Asia-focused banking giant said Riyadh-headquartered AviLease, owned by the Public Investment Fund (PIF), would pay $700million as an initial consideration in addition to loans totalling around $2.9billion for the business.
Upon completion of the deal, set to be finalised towards the end of 2023, AviLease will own more than 120 aeroplanes, as well as the Dublin-based Pembroke aircraft leasing company.
Meanwhile, Standard Chartered expects to make a gain of about $300million and see an increase in its common equity tier-one capital ratio – a measure of financial resilience – of approximately 19 percentage points.
The financial services group revealed in January that it was considering ‘alternatives’ for the division’s future ownership as part of plans to streamline its business.
In 2022, the segment recorded a $15.6 million profit and gross assets of $3.8billion and provided around 2 per cent of overall group income and 1 per cent of its risk-weighted assets.
That same year, it was ranked the 28th biggest lessor by volume of managed aircraft by the publisher AirFinance Journal.
Simon Cooper, chief executive of corporate, commercial and institutional banking at Standard Chartered, said the takeover ‘allows us to continue to focus our efforts on those areas where we are most differentiated and to further progress our return on tangible equity journey.’
Fahad Al-Saif, chair of AviLease, said the ‘acquisition will propel AviLease and will in turn support Saudi Arabia’s aviation ecosystem, on our path to help realise the Saudi Vision 2030s objective of diversifying the economy and adding high-value employment opportunities for Saudi citizens.’
Under the leadership of Crown Prince Mohammed bin Salman, the PIF has invested massive sums in various sectors, ranging from sports to automotive, video games, banking and technology, as part of goals to reduce Saudi Arabia’s reliance on oil revenues.
In March, it announced the launch of a second Saudi flag carrier, Riyadh Air, alongside an order for 39 Boeing Dreamliner aircraft, with the option for 33 more.
By the end of the decade, it hopes the airline will help attract 100 million annual visits to Saudi Arabia, connect Riyadh with more than 100 international destinations and create over 200,000 jobs.
Aviation industry veteran Tony Douglas has been brought in to run the airline, having just spent four years as chief executive of Abu Dhabi-based Etihad Airways.
Standard Chartered shares were 1 per cent higher at 718.8p on Tuesday morning and have grown around 21 per cent over the past 12 months.
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