Analyst Note| Joshua Aguilar |
On March 7, 2021, The Wall Street Journal reported that aircraft operator AerCap Holdings is nearing a deal for General Electric’s Capital Aviation Services, or Gecas, based on a $30 billion-plus enterprise value. We don’t yet have additional deal terms and can’t precisely model it without knowing the exact enterprise value and debt versus cash financing mix. Therefore, we maintain our $14.10 fair value estimate for narrow-moat GE until we have greater clarity on the deal. However, we’ve modeled potential deal parameters in the background based on several assumptions, which implies about $0.50 of shareholder value accretion on our fair value estimate. This would hypothetically bring our fair value estimate up about 3% to 4%. The key takeaway is that the reported deal terms poke yet another hole in a bear case that we think is on its last legs. Recall that just two years ago, before the pandemic and the sale of PK AirFinance to Apollo for $3.6 billion, bears asserted that the value of Gecas’ portfolio was in the mid-$20 billion worth.