Japanese companies to acquire RBS Aviation for $7.3 billion

Sumitomo Mitsui Financial Group (SMFB) and Sumitomo Corp. (SC) have reached an agreement to acquire RBS Aviation Capital, the Royal Bank of Scotland's aircraft leasing unit.

According to attorneys advising the Japanese companies, the transaction price is $7.3 billion. SMFB and SC will jointly own RBS Aviation, which has 206 aircraft in its portfolio as well as commitments for another 87 by 2015, according to the law firm Milbank, Tweed, Hadley and McCloy, which advised SMFB. Future order commitments of $3.7 billion will transfer to the new owners. The sale is expected to close by the end of the third quarter.

In a statement, SMFB said, "The aircraft leasing industry expects demand for commercial aircraft to continue to grow steadily underpinned by the increasing volume of air travelers on the back of the growth of emerging markets, especially in Asia, and the rapid growth of low cost carriers." It noted that RBS Aviation is the fourth largest aircraft leasing firm in the world in terms of book value.

In an analysis of the deal, Fitch Ratings said, "We expect aircraft leasing companies to play a larger role in financing new aircraft in the coming years as commercial banks and export credit agencies recede in importance. Aircraft delivery growth is likely to remain strong over the next few years as global passenger traffic and cargo volumes expand. The acquisition by SMFG and its partner Sumitomo Corp. is part of a broader trend of Japanese banks seeking overseas deals to offset their limited domestic growth prospects."