Avolon IPO values aircraft lessor at up to $1.86 billion

By Padraic Halpin

DUBLIN (Reuters) - Ireland's Avolon Holdings (IPO-AVOL.N) launched an initial public offering valuing it at up to $1.86 billion (1.18 billion pounds) on Monday, as a Chinese suitor confirmed it had dropped its bid for the world's ninth largest aircraft leasing firm.

The Dublin-based firm, founded in 2010 by leasing entrepreneur Domhnal Slattery, said it expected the sale of existing stock to be priced between $21 and $23 per share. Trading is expected to begin in the next two weeks.

Avolon filed for a New York listing in June, only to be approached by China Investment Corp (CIC) and Chinese state aerospace firm AVIC Capital .

Confirming an earlier Reuters story, AVIC said on Monday it had cancelled its approach after the Irish company's board turned down the offer.

The offering of 13.6 million shares, or just under a fifth of its capital, by Avolon's outside backers will raise about $314 million at the top end of the expected price range.

All the shares are being sold by existing investors, including private equity firms Cinven Ltd, CVC Capital Partners Ltd and Oak Hill Capital Partners, and the Singapore government, according to a regulatory filing.

Leasing is playing an increasingly visible role in the $100 billion-a-year new jetliner market as the industry prepares to double its fleet size in 20 years.

Companies hope to capitalise on growing interest in aviation from longer-term investors such as insurers and pension funds, who are hoping to boost yields. [

LISTED RIVALS

A successful float would expand a quartet of New York-listed pure-play aircraft lessors with a combined market value of $16 billion: AerCap (AER.N), Air Lease (AL.N), Aircastle (AYR.N) and FLY Leasing (FLY.N). (Graphic: http://link.reuters.com/pus53w)

Based also on the debt financing, Avolon would be the third largest listed player with an enterprise value over $6 billion, according to recent figures compiled by Wells Fargo Securities.

General Electric's (GE.N) Capital division, which dominates the industry alongside AerCap, and commercial lender CIT (CIT.N) also have important leasing subsidiaries.

Connecticut-based Intrepid Aviation made a preliminary IPO filing with U.S. regulators last month, noting the percentage of commercial aircraft under lease had risen from less than 2 percent in 1980 to 40 percent this year.

"The initial performance of previous landmark aircraft lessor IPOs is distorted by their proximity to the beginning of the global financial crisis," said Dublin brokerage Goodbody.

"More recently lessor valuations and share prices have performed robustly, helped by the sector’s ability to trade strongly since the (crisis)," it added in a note.

(Additional reporting by Kirti Pandey and Tim Hepher; Editing by David Clarke/Keith Weir)