GE to sell $2.4B equity stake in AerCap ahead of GE Vernova spinoff, transition to GE Aerospace

General Electric will sell roughly half of its $4.9 billion stake in a global aviation leasing company.

Dublin, Ireland-based AerCap Holdings N.V. on Monday, Sept. 11, announced a secondary offering of nearly 40.7 million shares held by GE Capital US Holdings, a GE subsidiary. The shares are priced at $59 each, the company said, for a total sale of $2.4 billion.

GE (NYSE: GE) previously held 33.6% of AerCap’s outstanding shares. Following the sale, its equity stake in the company will diminish to 17.2%.

GE received a 45.4% equity stake in AerCap – 11.5 million shares – as well as $23 billion in cash and $1 billion in AerCap senior notes when AerCap purchased GE Capital Aviation Services (GECAS) from GE in November 2021. The move immediately made AerCap the worldwide leader in aircraft leasing and the largest customer of Airbus and Boeing.

GE retains two board seats at AerCap so long as it holds at least 10% of outstanding shares. It was prohibited from selling shares for nine months following the GECAS sale but began drawing down its position afterward, most recently in March, when AerCap’s board approved a $500 million share buyback from GE.

The latest sale further bolsters GE’s strong balance sheet heading into the spinoff of GE Vernova in early 2024, the final move in the company’s plan to split into three companies. GE Healthcare spun off in early 2022. The remaining company, GE Aerospace – by far the most profitable and fastest growing of the three – will anchor its corporate headquarters to Cincinnati following the Vernova spinoff.

“The move gives us significant capacity to ensure that both Vernova and Aerospace have a strong balance sheet and that Vernova will spin with a net cash position when we launch them,” GE and GE Aerospace Chief Financial Officer Rahul Ghai said of the AerCap share sale. Ghai spoke at Morgan Stanley’s Laguna Conference Sept. 14.

GE has $4.6 billion in free cash flow and $22.4 billion cash on-hand with a negligible amount of net debt. In early September, the company retired the remainder of its preferred shares. Its stock is up 111% since September 2022.

GE’s investment sheet, filed with the U.S. Securities and Exchange Commission Aug. 1, shows the company retains a $5 billion stake in GE Healthcare, which it plans to diminish over time, and a $9.2 million stake in Hyliion, a commercial electric vehicle manufacturer.

It remains to be seen whether GE will retain a stake in GE Vernova following its spinoff.

“We think we are tracking to the higher end of our (earnings per share) and free cash flow guidance for the third quarter," Ghai said. "Things could not be set up better for both businesses. We’re really excited about where we are and the things ahead of us.”

GE also has granted 30-day secondary option for more than 6.1 million additional shares of AerCap, valued at $360 million, potentially bringing down GE’s stake in AerCap to $2.2 billion, or 14.5% of its outstanding shares.

AerCap will not receive any proceeds from the sales, though it will repurchase 37.5% of shares in the secondary offering (15.25 million shares) at a price of $57.53 per share for a total value of $8.77 billion, as well as the equivalent percent of shares sold through the secondary option.

Goldman Sachs, Citigroup, Barclays, Bank of America Securities, J.P. Morgan, BNP Paribas, Deutsche Bank, Evercore ISI, HSBC and SMBC Nikko are acting as joint bookrunning managers for the secondary offering.