SHAREHOLDERS’ CIRCULAR
AERCAP HOLDINGS N.V. (“AerCap”)
Regarding agenda items 2. and 3. relating to the acquisition of ILFC
Extraordinary general meeting of shareholders to be held on 13 February 2014
Venue: offices of AerCap at AerCap House, Stationsplein 965, 1117 CE Schiphol, the Netherlands.
Time: 9.30 a.m. (Amsterdam time)
IMPORTANT INFORMATION
This circular may contain certain statements, estimates and forecasts with respect to future performance and events. These statements, estimates and forecasts are intended to be covered by the safe harbor for “forward-looking statements” provided by the US Private Securities Litigation Reform Act of 1995. In some cases, such forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “might,” “will,” “should,” “expect,” “plan,” “intend,” “estimate,” “anticipate,” “believe,” “predict,” “potential” or “continue” or the negatives thereof or variations thereon or similar terminology. All forward-looking statements included in this circular are not statements of historical fact but are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, and may include projections of future financial performance based on growth strategies and anticipated trends in our businesses. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause actual results, level of activity performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied in any forward-looking statements. As a result, there can be no assurance that any forward-looking statements included in this circular will prove to be accurate or correct. In light of these risks, uncertainties and assumptions, the future performance or events described in any forward-looking statements in this circular might not occur. Among the factors that could cause actual results to differ materially from those described in any forward-looking statements are factors relating to the ability to consummate the Proposed Transaction; the ability to obtain requisite regulatory, lender and shareholder approval and the satisfaction of other conditions to the Proposed Transaction; the ability of AerCap to successfully integrate ILFC’s operations and employees and realize anticipated synergies and cost savings; the potential impact of the announcement or consummation of the Proposed Transaction on relationships, including with employees, suppliers, customers and competitors; and changes in general economic, business and political conditions, including changes in the financial markets, as well as those factors described under the headings “Risk Factors” in AerCap’s and ILFC’s respective annual reports on Form 20-F and Form 10-K for the year ended 31 December 2012, as filed with the US Securities and Exchange Commission (the “SEC”). Copies of such annual reports on Form 20-F and Form 10-K are available online at http://www.sec.gov or on request from each company. Except for any obligation to disclose material information under federal securities laws, AerCap and ILFC do not undertake any obligation to, and will not, update any forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and AerCap and ILFC do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. Certain figures contained in this circular have been subject to rounding adjustments. Accordingly, in certain instances the sum of the numbers in a column or a row in tables contained herein may not conform exactly to the total figure given for that column or row. With the exception of the information contained in section 5, which has been provided by and at the responsibility of AIG Capital Corporation, the information in this circular has been solely provided by and at the responsibility of the AerCap. This circular has not been submitted to, or reviewed by, any securities commission of any jurisdiction. This circular is governed by Dutch law and any dispute arising in connection therewith is subject to the exclusive jurisdiction of the competent court in Amsterdam, the Netherlands.
TABLE OF CONTENTS
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1.
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DEFINITIONS
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4
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2.
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INTRODUCTION
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7
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3.
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EVENTS LEADING UP TO THE PROPOSED TRANSACTION
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9
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4.
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RATIONALE OF THE PROPOSED TRANSACTION
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11
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5.
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SELECTED INFORMATION ON ILFC AND AIG
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13
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6.
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UNAUDITED SELECTED PRO FORMA FINANCIAL INFORMATION
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23
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7.
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SUMMARY OF THE TERMS OF THE PROPOSED TRANSACTION
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27
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8.
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FINANCING OF THE PROPOSED TRANSACTION
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35
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9.
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SENIOR MANAGEMENT RETENTION
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36
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10.
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RECOMMENDATION BY THE BOARD
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37
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Unless the context otherwise requires, in this shareholders’ circular:
“AerCap” means AerCap Holdings N.V.
“AIG” means American International Group, Inc.
“Board” means the board of directors of AerCap
“Bridge Credit Agreement” has the meaning ascribed thereto in Chapter 8 (Financing of the Proposed Transaction) of this shareholders’ circular
“Cash Consideration” has the meaning ascribed thereto in Chapter 7 (Summary of the terms of the Proposed Transaction) of this shareholders’ circular
“CEO” means Mr. Aengus Kelly, the Chief Executive Officer and Executive Director of AerCap
“CFIUS” means the Committee on Foreign Investment in the United States
“Chairman” means Mr. Pieter Korteweg, the chairman of the Board
“Citibank” means Citibank N.A.
“Citigroup” means Citigroup Global Markets Inc.
“Closing Effective Time” means the time of Closing
“Closing” means closing of the sale and purchase of the issued and outstanding shares of common stock of ILFC in the manner contemplated in the Share Purchase Agreement
“Closing Failure” has the meaning ascribed thereto in Chapter 7 (Summary of the terms of the Proposed Transaction) of this shareholders’ circular
“Committee” means the Nomination and Compensation Committee of AerCap
“Compliance Agreement” has the meaning ascribed thereto in Chapter 7 (Summary of the terms of the Proposed Transaction) of this shareholders’ circular
“Consideration” means the Cash Consideration and the Stock Consideration jointly
“DCC” means the Dutch Civil Code (Burgerlijk Wetboek)
“EGM” has the meaning ascribed thereto in the introduction of this shareholders’ circular
“FAA” means the U.S. Federal Aviation Administration
“Fitch” means Fitch Ratings Inc.
“General Meeting” means the general meeting of AerCap
“Goldman Sachs” means Goldman Sachs International
“ILFC” means International Lease Finance Corporation
“Moody’s” means Moody’s Corporation
“Potential Jumbo Transaction” has the meaning ascribed thereto in Chapter 3 (Events Leading up to the Proposed Transaction) of this shareholders’ circular
“Proposals” has the meaning ascribed thereto in Chapter 2 (Introduction) of this shareholders’ circular
“Proposed Transaction” has the meaning ascribed thereto in Chapter 2 (Introduction) of this shareholders’ circular
“Purchaser” means AerCap Ireland Limited, an Ireland private limited liability company ultimately controlled by AerCap
“Registration Rights Agreement” has the meaning ascribed thereto in Chapter 7 (Summary of the terms of the Proposed Transaction) of this shareholders’ circular
“SEC” means the U.S. Securities and Exchange Commission
“Seller” means AIG Capital Corporation
“Seller Credit Agreement” has the meaning ascribed thereto in Chapter 7 (Summary of the terms of the Proposed Transaction) of this shareholders’ circular
“Shares” means ordinary shares in the capital of AerCap with a par value of EUR 0.01 each
“Share Purchase Agreement” means the share purchase agreement between AerCap, the Purchaser, the Seller and AIG, relating to the acquisition of ILFC
“S&P” means Standard & Poor’s Financial Services LLC
“Stock Consideration” has the meaning ascribed thereto in Chapter 7 (Summary of the terms of the Proposed Transaction) of this shareholders’ circular
“Shareholders’ Agreement” has the meaning ascribed thereto in Chapter 7 (Summary of the terms of the Proposed Transaction) of this shareholders’ circular
“Transaction Agreements” means the Share Purchase Agreement, the Shareholders’ Agreement, the Registration Rights Agreement, the Compliance Agreement, the Seller Credit Agreement and the Bridge Credit Agreement and certain other agreements and documents contemplated thereunder and related thereto
“UBS” means UBS AG, Stamford Branch
“UBS Securities” means UBS Securities LLC
“Voting Agreement” has the meaning ascribed thereto in Chapter 3 (Events leading up to the Proposed Transaction) of this shareholders’ circular
“Waha” means Waha AC Coöperatief U.A.
This shareholders’ circular has been prepared by AerCap to inform its shareholders, and other persons entitled to vote, at its extraordinary general meeting of shareholders to be held on 13 February 2014 (the “EGM”), on the acquisition by the Purchaser of all of the issued and outstanding shares of common stock of ILFC, in exchange for the following consideration:
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USD 3,000,000,000 (which consists of USD 2,400,000,000 to be paid by AerCap to the Seller at Closing and a special distribution of USD 600,000,000 to be made by ILFC to the Seller at the Closing); and
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97,560,976 Shares (as adjusted pursuant to the terms of the Share Purchase Agreement), representing approximately 46% of AerCap’s outstanding Shares after the Closing;
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subject to the terms of the Transaction Agreements (the “Proposed Transaction”).
Under article 2:107a DCC and article 16.7 of AerCap’s articles of association, a resolution of the Board regarding a significant change to the identity or the nature of AerCap or its business, which includes an acquisition at a value in excess of a threshold of one-third of the total assets of AerCap, must be approved by the General Meeting. The Proposed Transaction is at a value that exceeds the above-mentioned threshold.
This shareholders’ circular provides further details of the Proposed Transaction in connection with items 2. and 3. on the agenda for the EGM. The Board believes that the Proposed Transaction is in the best interests of AerCap, its shareholders and other stakeholders and is at fair terms and price.
Accordingly, the Board recommends that the AerCap shareholders, and other persons entitled to vote, vote in favor of the proposals with respect to items 2. and 3. on the agenda for the EGM. AerCap aims to complete the Proposed Transaction in Q2 2014, subject to, among other things, the General Meeting having approved the Proposed Transaction.
In order to enable AerCap (for the purposes of the below agenda items the “Company”) to enter into the Proposed Transaction, AerCap shareholders, and other persons entitled to vote, will be asked to vote in favour of the following proposals (the “Proposals”) at the EGM:
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Agenda item 2.
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Approval pursuant to Article 2:107a Dutch Civil Code and article 16.7 of the Company’s articles of association in relation to the anticipated acquisition of International Lease Finance Corporation (voting item).
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Agenda item 3.
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(a) Conditional appointment of Robert H. Benmosche as non-executive director for a period of four years (voting item).
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(b) Conditional appointment of David L. Herzog as non-executive director for a period of four years (voting item).
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The Proposals under agenda items 3. (a) and (b) are conditional on the adoption of agenda item 2., and if adopted, the appointments shall be subject to, and effective as of, the Closing Effective Time.
Under AerCap’s articles of association, the adoption of the Proposals requires an absolute majority of the votes at the EGM cast in favour of the Proposals. At the date of this shareholders’ circular AerCap’s issued and outstanding share capital amounts to EUR 1,137,206.42, consisting of 113,720,642 Shares, all of which Shares are fully paid-up.
Under the Voting Agreement, Waha, currently the holder of approximately 26% of the voting rights in AerCap, has committed to vote in favour of the Proposals.
Schiphol, 24 December 2013
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3.
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EVENTS LEADING UP TO THE PROPOSED TRANSACTION
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On 9 December 2012 the Seller and AIG entered into an agreement with Jumbo Acquisition Limited for the sale of up to 90.0% of ILFC’s common stock for approximately USD 4.75 billion in cash in a transaction that valued ILFC at approximately USD 5.28 billion (the “Potential Jumbo Transaction”). On 17 June 2013 AIG announced in a public filing with the SEC that AIG and Seller might pursue (but not enter into definitive documentation for, or consummate) other offers for ILFC and might continue to pursue (but not engage in widespread solicitation of orders for, or request effectiveness of) a public offering.
On 7 July 2013 the Board held a meeting at which meeting the Board decided to monitor developments regarding ILFC.
In July and August 2013 AerCap discussed and negotiated the financing of the potential acquisition of ILFC with UBS and Citigroup.
In early September 2013, AIG and AerCap engaged in discussions regarding a possible sale of ILFC to AerCap. AerCap and AIG discussed that, as part of any transaction, AIG would become a significant shareholder of AerCap because any transaction would involve a mix of cash and stock consideration.
On 26 September 2013, the Board held a meeting to discuss a draft letter to AIG with a proposal to acquire ILFC. The Board unanimously resolved to send the letter to AIG and the letter was sent on 2 October 2013.
On 10 October 2013, AerCap received a written response from AIG to the letter sent by AerCap on 2 October 2013. The response acknowledged the rationale for the potential acquisition of ILFC by AerCap.
Subsequently, negotiations took place between AerCap and AIG, both via physical meetings in New York and telephonically.
On 15 October 2013, the Board held a meeting to discuss, amongst other items, developments with respect to the potential acquisition of ILFC by AerCap.
On 29 October 2013, the Board held a meeting to discuss key developments with respect to the potential acquisition of ILFC by AerCap. The Board unanimously acknowledged the negotiation results so far and unanimously agreed to conduct due diligence with respect to ILFC.
On 31 October 2013, the CEO of AerCap met with Mr. Benmosche, the Chief Executive Officer of AIG, at the offices of AIG in New York to review and confirm the current status of the negotiations with respect to the potential acquisition of ILFC by AerCap.
AerCap and AIG began conducting “in-depth” commercial, financial, tax and legal due diligence investigations on each other in November 2013, which due diligence investigations continued until the entry into the Share Purchase Agreement.
On 13 November 2013, the Board held a meeting to discuss developments with respect to the potential acquisition of ILFC by AerCap. In that meeting, the Board acknowledged that, in order to successfully implement the Proposed Transaction, AerCap would need to ensure that it would retain AerCap’s senior management for a period that extended well beyond their current employment end dates in May 2015. Accordingly, the Board discussed the potential design and characteristics of a senior management compensation scheme that would meet the objective of long term retention.
Waha entered into a confidentiality undertaking with AerCap on 27 November 2013 and was informed of the Proposed Transaction on the same date. Subsequently, AerCap, the Seller and AIG conducted negotiations with Waha in respect of an agreement among AerCap, Waha, the Seller and AIG, pursuant to which Waha has agreed to support the Proposed Transaction, which agreement was signed on 16 December 2013 (the “Voting Agreement”).
On 3 December 2013, the Board held a further meeting to discuss developments with respect to the potential acquisition of ILFC by AerCap.
The Board and the board of AIG approved the Proposed Transaction on 16 December 2013 and 3 December 2013, respectively.
On 16 December 2013 AIG and the Seller terminated the agreements with Jumbo Acquisition Limited in relation to the Potential Jumbo Transaction.
The Share Purchase Agreement was executed on 16 December 2013 after the termination of the Potential Jumbo Transaction.
The Proposed Transaction was announced by AerCap and AIG in the morning of 16 December 2013, U.S. Eastern Time and in the afternoon Amsterdam time.
Throughout the process summarized above, a special committee of the Board composed of (i) the Chairman, (ii) the CEO, (iii) Mr. Salem R.R.A. Al Noaimi, (iv) Mr. Paul T. Dacier and (v) Mr. Robert G. Warden assisted management with matters related to the potential acquisition of ILFC. Furthermore AerCap has been advised by UBS Securities and Goldman Sachs as financial advisors, Cravath, Swaine and Moore LLP, NautaDutilh N.V., McCann FitzGerald and Freshfields Bruckhaus Deringer LLP as legal advisors and KPMG Tax as tax advisor with respect to the Proposed Transaction.
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4.
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RATIONALE OF THE PROPOSED TRANSACTION
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The Board proposes that AerCap consummates the Proposed Transaction and recommends that the AerCap shareholders, and other persons entitled to vote, vote in favor of the Proposals. Prior to reaching its determination to support the Proposed Transaction, the Board consulted with and received the advice of financial advisors and outside legal and tax counsels, discussed certain issues with AerCap’s management and considered a variety of factors weighing positively in favor of the Proposed Transaction, including the following material factors:
Shareholder value
The Proposed Transaction is expected to be more accretive to future earnings and earnings per Share than other available opportunities. The aircraft portfolio of the combined company is expected to generate high levels of sustained profitability, with ~85% of expected lease revenue for the next three years already contracted. Run-rate annual earnings per share of the combined company are expected to be in excess of USD 4.00 after completion of the integration of the combined company, which is currently expected to be completed in the course of 2015.
Value of the acquired portfolio and order book
As part of the Proposed Transaction, AerCap will acquire ILFC’s highly attractive portfolio of aircraft. The Board compared the purchase price to be paid by AerCap as part of the Proposed Transaction to the appraised value of the aircraft fleet by three independent appraisers and determined that based on this comparison the purchase price is favourable. Based on the closing stock price of AerCap’s shares on Wednesday 11 December 2013, the total consideration has a value of approximately USD 26 billion including the assumption of the outstanding ILFC net debt of approximately USD 21 billion1, which equates to approximately USD 6 billion below the appraised aircraft value (average of appraisal values provided by Ascend, BK and AISI) and the fair value of the other identifiable assets and liabilities. The resulting portfolio of the combined company will be heavily concentrated in the most modern, fuel efficient aircraft in the world. In addition, AerCap will acquire ILFC’s industry-leading order book for new-technology aircraft, which includes pricing terms and delivery schedules that are superior to those available in the current market and underpin the expected long term profitability of the combined company.
Establishment of an industry leader
AerCap’s acquisition of ILFC is expected to create the leading global franchise in the aircraft leasing industry. With a fleet of over 1,300 diverse aircraft and a highly attractive order book of 385 aircraft, the combined company has aircraft assets of approximately USD 35 billion, approximately 200 airline customers globally and projected annual revenue of approximately USD 5 billion. The combined company is expected to lead the industry with respect to size and various financial metrics. The combined company is expected to also have the most attractive order book in the industry in terms of
1 The final value of the total consideration will be determined on the basis of the closing stock price of AerCap’s shares and the outstanding ILFC net debt on the closing date of the Proposed Transaction.
aircraft type, pricing and delivery dates. The Proposed Transaction is expected to bring significant benefits to AerCap, its shareholders and other stakeholders.
Quality of funding and capital structure
The combined company is expected to have manageable capital expenditures of approximately USD 3.0 billion per annum between 2014 and 2016, combined with extensive access to all capital markets, including the unsecured and secured bond markets, the commercial bank market, ECA/EXIM and the ABS market. Both AerCap and ILFC have strong track records in accessing capital markets. With loyal investor bases and over USD 39 billion of successful financing over the last several years and given the combined company’s strong contracted operating cash flow, AerCap regards its capital requirements as manageable. In addition to its access to capital markets, the combined company will benefit from the USD 1.0 billion five-year unsecured revolving credit facility provided by AIG under the Seller Credit Agreement. This facility is expected to allow the combined company to access capital without absorbing capacity in the banking market, and with limited conditionality.
Opportunity to leverage existing operating capabilities
The Proposed Transaction is expected to result in meaningful opportunities to increase the financial performance of ILFC’s fleet through the application of AerCap’s industry-leading portfolio management, receivables management and fleet utilization capabilities. These applications of AerCap’s competitive advantages to the business of the combined company are expected to lead to significant improvements in working capital efficiency and cash flows.
AerCap also expects that the combined company will capitalize on the combined abilities of AerCap and ILFC with respect to the provision of large scale fleet solutions.
Synergies and improvements to operating efficiency
A number of functions and roles are duplicated in AerCap and ILFC and the acquisition of ILFC is expected to provide AerCap with the opportunity for cost savings and synergies in the combined company.
Benefits of transaction structure
Relocation of ILFC’s assets is necessary to align the assets with the operating platform of the combined company as AerCap already operates in Ireland. The transfer of assets will produce a reduction in the tax expense of the combined company based on the Irish tax rate.
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5.
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SELECTED INFORMATION ON ILFC AND AIG
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ILFC
ILFC was founded in 1973 and remained an independent company until it was acquired by AIG in 1990. While a wholly owned subsidiary of AIG, ILFC maintained its independently recognized brand name, operated outside of AIG’s core insurance operations and remained focused on its aircraft leasing business.
The portfolio of ILFC consists of approximately 1,000 owned or managed aircraft. As of 30 September 2013, the portfolio included 913 owned aircraft in its leased fleet and nine additional aircraft in AeroTurbine’s leased fleet. As of that date ILFC had 18 additional aircraft in its fleet classified as finance and sales-type leases, and provided fleet management services for 71 aircraft.
ILFC has also commitments to purchase 338 new high-demand, fuel-efficient aircrafts, including 10 through sale-leaseback transactions, through 2022. ILFC has approximately 200 customers in more than 80 countries. ILFC is an independent aircraft lessor, because it is not affiliated with any airframe or engine manufacturer. This provides ILFC with purchasing flexibility to acquire aircraft or engine models regardless of the manufacturer. For the year ended 31 December 2012 and the nine months ended 30 September 2013, ILFC had total revenues of USD 4.5 billion and USD 3.3 billion, respectively.
ILFC’s portfolio includes a diverse and strategic mix of aircraft. The diversified fleet of owned aircraft is comprised of 72% narrow body (single-aisle) aircraft and 28% wide body (twin-aisle) aircraft as measured by aircraft count, with 54% representing Airbus models and 46% representing Boeing models. The weighted average age of ILFC’s owned aircraft, weighted by the net book value of such aircraft, was 8.6 years at 30 September 2013. ILFC has the largest order position for the Boeing 787 and the largest order position among aircraft leasing companies for the Airbus A320neo family, according to reports currently available on the Airbus and Boeing websites, and it has a large order position for the Airbus A350. ILFC has also contracted with Embraer S.A. to purchase 50 E-Jets E2 next generation aircraft with deliveries starting in 2018, with the right to purchase an additional 50 of such aircrafts, marking the introduction of the E-Jets aircraft to its fleet.
ILFC leases aircraft to airlines operating in every major geographic region, including emerging and high-growth markets in Asia, Latin America, the Middle East and Eastern Europe. Among its largest lessees are AeroMexico, Air France, American Airlines, China Southern Airlines and Emirates. ILFC predominantly enters into net operating leases that require the lessees to pay all operating expenses, normal maintenance and overhaul expenses, insurance premiums and taxes. The leases relating to ILFC’s owned aircraft have terms of up to 15 years and the weighted average lease term remaining on the current leases, weighted by the ILFC net book value of owned aircraft, was 4.0 years as of 30 September 2013. The leases are generally payable in U.S. dollars with lease rates fixed for the term of the lease.
In addition to its primary leasing activities, ILFC provides fleet management services for aircraft portfolios for a management fee, for 71 aircraft as of 30 September 2013. It also provides engine
leasing, certified aircraft engines, airframes and engine parts, and supply chain solutions through a wholly owned subsidiary, AeroTurbine, Inc.
ILFC has 40 years of operating history, a premier brand name and operates its business principally from offices in Los Angeles, Miami, Amsterdam, Beijing, Dublin, Seattle and Singapore.
Below are ILFC’s consolidated balance sheets, consolidated statements of operations and cash flows for the year ended 31 December 2012 (audited) and for the nine months ended 30 September 2013 (unaudited)). Further details can be found in the Form S-1 filed by ILFC Holdings, Inc. with the U.S. SEC on 22 November 2013, for the accompanying notes and other details
(http://www.sec.gov/Archives/edgar/data/1528540/000104746913010780/a2217313zs-1a.htm).
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7.
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SUMMARY OF THE TERMS OF THE PROPOSED TRANSACTION
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IMPORTANT INFORMATION
In this chapter, certain important terms of Transaction Agreements are summarized. This summary is for ease of understanding the Proposed Transaction and does not in any way purport to be complete and is qualified in its entirety by the full text of the agreements described herein, which are publicly available as attachments to the Form 8-K filed by AIG with the SEC on 16 December 2013.
Share Purchase Agreement
Consideration
At the Closing, the Purchaser will purchase 45,267,723 shares of common stock of ILFC, which constitute 100% of the issued and outstanding shares of ILFC’s common stock, from the Seller in exchange for the following consideration:
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USD 3,000,000,000 (which consists of USD 2,400,000,000 to be paid by AerCap to the Seller at Closing and a special distribution of USD 600,000,000 to be made by ILFC to the Seller at the Closing) (the “Cash Consideration”); and
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97,560,976 Shares (as adjusted pursuant to the terms of the Share Purchase Agreement) (the “Stock Consideration”), representing approximately 46% of AerCap’s outstanding Shares after the Closing.
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Conditions to closing
The obligations of the Seller and Purchaser to proceed with the Closing are subject to the satisfaction or waiver of the following conditions (which conditions may only be waived by the mutual agreement of the Seller and Purchaser):
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all required regulatory and anti-trust approvals must have been obtained;
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clearance from CFIUS must have been obtained;
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there must be no legal restraint preventing consummation of the transactions contemplated by the Share Purchase Agreement and the other Transaction Agreements; and
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the General Meeting must have approved the Proposed Transaction.
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The obligation of the Seller to proceed with the Closing is further subject to the satisfaction or waiver of the following conditions (which conditions may only be waived by the Seller):
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AerCap’s warranties must be accurate (subject, in certain cases, to “materiality” and “material adverse effect” qualifiers) and AerCap must have complied in all material respects with its interim operating covenants;
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AerCap must not have experienced a “material adverse effect” between the entry into the Share Purchase Agreement and the Closing;
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the Stock Consideration must have been listed on the New York Stock Exchange; and
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the Registration Rights Agreement, the Shareholders’ Agreement and the Compliance Agreement must have been executed and delivered by AerCap.
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The obligation of Purchaser to proceed with the Closing is further subject to the satisfaction or waiver of the following conditions (which conditions may only be waived by Purchaser):
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all ILFC aircraft registered with the FAA must be held by, and registered with the FAA in the name of, an owner trustee that is a U.S. citizen;
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AIG and the Seller’s warranties must be accurate (subject, in certain cases, to “materiality” and “material adverse effect” qualifiers) and AIG and the Seller must have caused ILFC to comply in all material respects with its interim operating covenants;
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ILFC must not have experienced a “material adverse effect” between the entry into the Share Purchase Agreement and the Closing;
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certain waivers and amendments required under certain ILFC debt facilities in order to consummate the Proposed Transaction must have been obtained; and
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the Registration Rights Agreement and the Shareholders’ Agreement must have been executed and delivered by AIG.
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Regulatory approvals
The consummation of the Proposed Transaction is conditional upon the approval of certain regulatory and anti-trust authorities, including regulatory and anti-trust authorities in the United States and China, and CFIUS.
AerCap and Purchaser, on the one hand, and AIG and the Seller, on the other hand, are required to use reasonable best efforts to take the steps necessary, proper and advisable to obtain the governmental approvals necessary to consummate the Proposed Transaction.
Warranties
The Share Purchase Agreement contains warranties made by AIG and the Seller to AerCap and Purchaser (concerning ILFC and its subsidiaries) and by AerCap and Purchaser to AIG and the Seller. Certain of the warranties in the Share Purchase Agreement are subject to materiality or material adverse effect qualifications (that is, they will not be deemed to be untrue or incorrect unless their failure to be true or correct is material or would result in a material adverse effect). In addition, certain of the warranties in the Share Purchase Agreement are subject to knowledge qualifications, which means that those warranties would not be deemed untrue, inaccurate or incorrect as a result of matters of which certain listed individuals did not have actual knowledge.
Operating covenants
AIG and the Seller have agreed to certain covenants in the Share Purchase Agreement restricting the conduct of ILFC’s business between the entry into the Share Purchase Agreement and the Closing. AerCap has also agreed to certain covenants in the Share Purchase Agreement restricting the conduct of its business between the entry into the Share Purchase Agreement and the Closing.
Indemnity
AIG and the Seller, on the one hand, and AerCap and Purchaser, on the other hand, will indemnify each other for breaches of certain key warranties and breaches of covenants. AIG and the Seller will also indemnify AerCap and Purchaser for claims by Jumbo Acquisition Limited regarding the termination of the Potential Jumbo Transaction.
The warranties for which AIG and the Seller, on the one hand, and AerCap and Purchaser, on the other hand will indemnify each other will generally survive for 24 months after Closing (with the
“fundamental warranties” regarding the ability of the parties to complete the transactions surviving indefinitely and certain warranties related to taxes surviving for 36 months after closing).
Deductible – Indemnification for warranties (other than fundamental warranties) is subject to reciprocal deductibles of USD 40 million.
Cap – Indemnification for warranties (other than fundamental warranties) is subject to reciprocal caps of USD 1.0 billion.
Aggregate Liability Cap – AIG and the Seller’s aggregate liability under the Share Purchase Agreement is capped at USD 5.0 billion and AerCap and Purchaser’s aggregate liability under the Share Purchase Agreement is capped at USD 2.0 billion.
Gross-Up – AerCap and Purchaser are required to “gross up” indemnification payments to AIG and the Seller, as a result of Seller’s equity stake in AerCap on the date of payment, for losses incurred by AerCap.
No-Shops
The Seller is prohibited from soliciting proposals for, and entering into negotiations with respect to, competing transactions.
AerCap is also prohibited from soliciting proposals for, and entering into negotiations with respect to, certain competing transactions. However, in response to an unsolicited offer/proposal which the Board determines constitutes or could reasonably be expected to lead to a proposal that is superior to the Proposed Transaction AerCap may enter into negotiations with respect to a competing transaction. AerCap may only do so if the Board concludes that failure to take such action could reasonably be expected to be inconsistent with the directors’ fiduciary duties.
EGM/Change of Board Recommendation
AerCap is required to hold an EGM for its shareholders and other persons entitled to vote, to vote on the Proposed Transaction.
The Board has the flexibility to change its recommendation that the General Meeting approve the Proposed Transaction as a result of a post-signing development (including if a third party makes a superior proposal) if it determines that failure to do so would be inconsistent with the directors’ fiduciary duties.
AerCap must negotiate with AIG and the Seller before the Board changes its recommendation regarding changes to the Proposed Transaction which would make it no longer necessary for the Board to change its recommendation.
Tax provisions
AerCap and the Seller will make an election under Section 338(h)(10) of the U.S. Tax Code with respect to ILFC and each of its subsidiaries that is a U.S. domestic corporation.
The Seller is responsible for all pre-closing U.S. consolidated tax liabilities of ILFC. At the Closing, the Seller will pay AerCap the amount of all current income tax liabilities of ILFC reflected on ILFC’s opening balance sheet after giving effect to the Proposed Transaction and the Section 338(h)(10) election described above.
Compensation and benefits matters
The Seller will retain all obligations and liabilities with respect to benefit plans that are not sponsored solely by ILFC, as well as all equity compensation arrangements, with the exception of long-term incentive and TARP-related compensation. ILFC will retain obligations and liabilities with respect to benefit plans sponsored solely by ILFC, including with respect to earned bonuses and deferred compensation.
AIG and its affiliates will be prohibited from soliciting ILFC employees for three years following the Closing.
For any ILFC employee that is terminated within three years of the Closing, AerCap will provide severance payments and benefits that are no less favourable than those provided by the Seller.
Termination rights
Either AerCap or the Seller can terminate the Share Purchase Agreement if:
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(1)
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Closing does not occur within nine months of signing (subject to a possible extension of up to three months);
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(2)
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the General Meeting does not approve the Proposed Transaction;
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(3)
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there is a final and non-appealable order enjoining the Proposed Transaction;
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(4)
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the other party has breached its warranties or covenants and such breach would result in the failure of a closing condition, and such breach has not been cured by the earlier of 16 September 2014 and the date falling three months after the date of such breach; or
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(5)
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there has been a material adverse effect within the meaning of the Share Purchase Agreement on ILFC (which allows Purchaser to terminate) or on the AerCap (which allows AIG or the Seller to terminate), and has not been cured by the earlier of 16 September 2014 and the date falling three months after the date of the occurrence of the material adverse effect.
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The Seller can also terminate if:
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(1)
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the Board changes its recommendation;
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(2)
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the General Meeting has not been duly called and held prior to the termination of the Voting Agreement (as the duration of such Voting Agreement may be extended) unless the failure of such General Meeting to have been duly called and held within such period was the result of any order by a governmental authority restraining, enjoining or otherwise prohibiting the General Meeting from being held; or
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(3)
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all of the closing conditions are satisfied or waived (except those that are to be satisfied at closing), AIG or the Seller has given notice to Purchaser that it is prepared to close and Purchaser fails to close by the date required pursuant to the Share Purchase Agreement (a “Closing Failure”).
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Termination fees
The Purchaser is required to pay the Seller a USD 100 million termination fee if:
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(1)
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AIG or the Seller terminates because the Board changes its recommendation;
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(2)
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certain competing offers are made, the Share Purchase Agreement is then terminated because either the General Meeting does not approve the Proposed Transaction or Closing has not occurred within 9 months (and the General Meeting has not yet approved the transaction at the time of termination), and AerCap enters into an alternative transaction within 12 months of termination
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(3)
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AIG or the Seller terminates because of a Closing Failure or Purchaser terminates because the closing does not occur within 9 months under circumstances where AIG or Seller could have terminated because of a Closing Failure; or
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(4)
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AIG or the Seller terminates because the General Meeting has not been duly called and held prior to the termination of the Voting Agreement (as the duration of such Voting Agreement may be extended) unless the failure of such General Meeting to have been duly called and held within such period was the result of any order by a governmental authority restraining, enjoining or otherwise prohibiting the General Meeting from being held.
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Specific performance
The parties have agreed that they will be entitled to seek an injunction or injunctions to prevent breaches of the Share Purchase Agreement and to enforce specifically the terms and provisions of the Share Purchase Agreement without proof of damages or otherwise. Specific performance is available to the parties in addition to any other remedy to which they are entitled, except that the Seller is not entitled to receive a termination fee in addition to a grant of specific performance to consummate the Proposed Transaction.
Governing law and submission to jurisdiction
The Share Purchase Agreement is governed by New York law. All disputes will be settled by arbitration in accordance with the Rule of Arbitration of the International Chamber of Commerce.
Shareholders’ Agreement and Registration Rights Agreement
As a condition to the Closing, Seller, AIG, and AerCap will enter into a shareholders’ agreement (the “Shareholders’ Agreement”) and a registration rights agreement (the “Registration Rights Agreement”).
Board nomination rights
For as long as AIG and its subsidiaries own at least 10% of the outstanding Shares, the Seller will be entitled to nominate two directors to the Board, and for as long as the AIG group owns any of the Shares, the Seller will be entitled to nominate one director to the Board. If elected, the Seller’s nominated directors will serve four year terms, but one of the Seller’s nominated directors will resign if the AIG group’s aggregate ownership decreases below 10% of AerCap’s outstanding Shares and the second will resign if the AIG group ceases to own any Shares. AerCap has also agreed not to grant any person the right to nominate more directors than the Seller.
Restrictions on voting of Shares
In general, the AIG group may vote Shares constituting up to 24.9% of Shares able to vote (taking into consideration such voting restriction) and must abstain from voting the remainder of its Shares. This voting restriction will not apply to, and the AIG group may vote 100% of its Shares in connection with:
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any transaction requiring approval of the General Meeting under article 2:107a DCC, other than change of control transactions not approved by the Board;
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any merger or sale of substantially all of the assets of AerCap or other change of control transactions involving AerCap, in each case approved by the Board;
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changes to AerCap’s organizational documents that would have a materially adverse and disproportionate effect on the AIG group relative to AerCap’s other shareholders; and
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●
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any proposal at a General Meeting to limit or exclude the AIG group’s pre-emptive rights.
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Until the AIG group holds less than 10% of the outstanding Shares, the AIG group must abstain from voting any of its Shares in connection with the election or removal of any director nominees not approved by the Board and any change of control transaction not approved by the Board.
Foundation structure
In the unforeseen event that Seller would challenge the enforceability of the voting restrictions in the Shareholders’ Agreement, AerCap is entitled to require the AIG group to implement the foundation structure. In such event the AIG group will transfer its Shares to a Dutch foundation (stichting), in exchange for which the AIG group will receive a corresponding number of registered depository receipts from the foundation which will provide the AIG group with the economic benefits of AerCap shares, while the voting rights will remain with the foundation.
The foundation would be subject to the same voting agreement as the AIG group, and the AIG group would be able to instruct the foundation how to vote on the specific matters on which the AIG group
would be entitled to vote under the voting agreement provisions of the Shareholders’ Agreement. The members of the board of the foundation would be appointed by AerCap.
Lock-up periods
The AIG group is prohibited from selling any Shares prior to 9 months after the date of Closing. The AIG group may sell up to 1/3 of the Shares it acquires pursuant to the Share Purchase Agreement beginning 9 months after the date of Closing, 2/3 of the Shares it acquires pursuant to the Share Purchase Agreement beginning 12 months after the date of Closing and all of the Shares it acquires pursuant to the Share Purchase Agreement beginning 15 months after the date of Closing.
Restrictions on transfer of Shares
The AIG group may not transfer more than 9.9% of the outstanding Shares to any one transferee, except in a bona-fide broadly distributed underwritten public offering, and may not transfer any of the Shares in connection with any tender offer, exchange offer or other acquisition not supported by the Board. Restrictions on the transfer of the AIG group’s Shares will not apply to transfers to AerCap or wholly owned subsidiaries of AIG, or to transfers in connection with a merger or acquisition approved by the Board.
Standstill provisions
Until six months after the first date on which the AIG group owns less than 10% of the outstanding Shares, the AIG group will be subject to customary standstill provisions.
Pre-emptive rights
If AerCap issues equity securities for cash in an amount equal to or greater than 20% of AerCap share capital, AerCap shall not exclude or limit the AIG group’s pre-emptive rights - except to the extent such rights are limited or excluded by the General Meeting - to purchase the portion of the issued Shares required to maintain its ownership percentage in AerCap.
Share repurchases
If AerCap offers to repurchase Shares from other shareholders, it is required to offer to repurchase the AIG group’s Shares pro rata.
Registration rights
The Registration Rights Agreement will provide that, subject to the lock-up periods described above, from and after the date that is 210 days after the Closing, the AIG group will have customary registration rights with respect to the Stock Consideration.
Specific performance
The parties have agreed that they will be entitled to seek an injunction or injunctions to prevent breaches of the Shareholders’ Agreement and the Registration Rights Agreement and to enforce specifically the terms and provisions of the Shareholders’ Agreement and the Registration Rights Agreement without proof of damages or otherwise in addition to any other remedy to which they are entitled.
Governing law, submission to jurisdiction and dispute resolution
The Shareholders’ Agreement is governed by Dutch law and the Registration Rights Agreement is governed by New York law. The Shareholders’ Agreement provides that all disputes will be settled in the courts of Amsterdam, The Netherlands. The Registration Rights Agreement provides that all disputes will be settled by arbitration in accordance with the Rule of Arbitration of the International Chamber of Commerce.
Compliance Agreement
AIG and AerCap have entered into a financial reporting and compliance agreement (the “Compliance Agreement”) pursuant to which AerCap has agreed to, among other things, adopt certain compliance policies, provide AIG with reports and access to certain information and personnel and cooperate with AIG in complying with certain regulatory requirements.
Seller Credit Agreement
AerCap has obtained USD 1,000,000,000 of committed unsecured financing from AIG, which will provide AerCap with additional liquidity and working capital. AerCap Ireland Capital Limited is the borrower under the facility, with AerCap, AerCap Aviation Solutions B.V. and AerCap Ireland Limited as guarantors on at signing. ILFC, any financing trust established as a successor to ILFC, and any subsidiary of the financing trust (or, if there is no financing trust, AerCap Ireland Capital Limited) of which ILFC is a subsidiary will be added as guarantors on the closing date via assumption agreements signed immediately following closing. The credit agreement governing the facility (the “Seller Credit Agreement”) was signed by the parties thereto at the time of signing of the Share Purchase Agreement, but the facility will not be available for drawing until the Closing. Commitments under the facility mature five years after consummation of the Proposed Transaction, and loans under the facility bear interest at LIBOR plus 375 basis points. Amounts borrowed under the Seller Credit Agreement can be repaid and reborrowed up until maturity. The Seller Credit Agreement contains customary representations, covenants and events of default.
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8.
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FINANCING OF THE PROPOSED TRANSACTION
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The Cash Consideration is expected to be funded through a combination of new debt financing and cash of the combined company.
In connection with the financing of the Proposed Transaction, AerCap has entered into a USD 2,750,000,000 bridge credit agreement with UBS, as administrative agent, Citigroup and UBS Securities as joint lead arrangers and joint bookrunners, and Citibank, as syndication agent (the “Bridge Credit Agreement”). The borrower under the facility is AerCap Ireland Capital Limited, and AerCap, together with AerCap Aviation Solutions B.V. and AerCap Ireland Limited, are guarantors as of signing. At the Closing, ILFC and certain of ILFC’s subsidiaries will become guarantors of the facility. The loans under the facility will mature 364 days after the Closing. The interest rate per annum applicable to the facility will be, at the election of AerCap, either (i) an adjusted London inter-bank offer rate (“LIBOR”) plus an initial 175 basis point spread (which increases to 200 basis points if the ratings of AerCap’s senior, unsecured long-term debt from S&P and Fitch is not BB or better, in each case with stable or positive outlook, prior to the 90th day after the Closing), which increases to 225 basis points 90 days after the Closing, 262.5 basis points 180 days after the Closing, and 312.5 basis points 270 days after the Closing, or (ii) an Alternate Base Rate (as defined below) plus an initial 75 basis point spread (which increases to 100 basis points if the ratings of AerCap’s senior, unsecured long-term debt from S&P and Fitch is not BB or better, in each case with stable or positive outlook, prior to the 90th day after the Closing), which increases to 125 basis points 90 days after the Closing, 162.5 basis points 180 days after the Closing, and 212.5 basis points 270 days after the Closing. The “Alternate Base Rate” means the greatest of the adjusted one-month LIBOR plus 100 basis points per annum, the prime commercial lending rate of UBS and the weighted average of rates on overnight funds transactions with members of the US Federal Reserve System plus 50 basis points per annum. AerCap Ireland Capital Limited has the right under the facility to prepay any amounts outstanding without penalty or premium. The facility contains customary representations, warranties, covenants and events of default, and has limited conditions on borrowing, including a condition that the Proposed Transaction be consummated prior to or substantially concurrently with the making of loans under the facility. In connection with the facility, AerCap has entered into fee letters and other agreements with UBS and Citibank under which AerCap agrees to pay certain fees and expenses to UBS and Citibank and/or their affiliates.
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9.
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SENIOR MANAGEMENT RETENTION
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AerCap wishes to retain its executive management team, who have consistently demonstrated superior performance and are crucial to a successful implementation of the Proposed Transaction. To this end, AerCap has designed an additional compensation scheme, designed to ensure AerCap’s continued benefit from the services of AerCap’s executive management team and to reward them for superior company performance and improvement in shareholder value. To ensure the objectivity of the compensation setting process, the Committee engaged, and has been advised, by Towers Watson as an independent consultant, without the involvement of AerCap’s executives. The Committee tasked the independent consultant with the consideration of AerCap’s goals of retaining the highest calibre executives and motivating them to superior performance, and directed the independent consultant to conduct a benchmarking study against AerCap’s peers to ensure a competitive compensation scheme attuned to AerCap’s performance against its competitors. The resulting scheme includes, in addition to competitive annual compensation, the opportunity to earn long-term equity incentive awards. Two-thirds of an executive’s equity incentive awards will be subject to AerCap’s achievement of challenging performance targets that will reinforce the alignment of management’s interests with those of AerCap and its shareholders. This portion of the equity incentive awards will vest in May 2018, but only if AerCap meets the required targets. The remaining one-third of an executive’s incentive award will be subject to time-based vesting, conditioned on continued employment through May 2018, with the exception of Mr. Aengus Kelly, AerCap’s executive director and Chief Executive Officer. The remaining one-third of Mr. Aengus Kelly’s equity incentive award will vest a year later in May 2019, thus incentivizing him to contribute his services and leadership for at least the next five years, during which time he will be responsible for overseeing the continued excellence of management and AerCap. The new compensation scheme is subject to, and effective from, the Closing Effective Time. Concurrent herewith, it is proposed to the EGM that Mr. Aengus Kelly be re-appointed as executive director of AerCap for a period of four years, with effect from the expiry of his current term at the close of the 2015 annual general meeting of shareholders. In this way, AerCap secures the continued services and leadership of Mr. Aengus Kelly and his outstanding executive management team during a period of significant growth and advancement.
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10.
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RECOMMENDATION BY THE BOARD
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The Board, after having duly considered the relevant strategic, economic, financial and social aspects, has determined that the Proposed Transaction, including the appointment of Robert H. Benmosche and David L. Herzog as non-executive directors, is in the best interest of AerCap and all of its shareholders, financiers and other stakeholders. The Board has conducted discussions with UBS Securities and Goldman Sachs as financial advisors and Cravath Swaine & Moore LLP, NautaDutilh N.V., McCann Fitzgerald and Freshfields Bruckhaus Deringer LLP as their legal advisors. The Board received an opinion from Goldman Sachs, attached as Exhibit A and dated as at 16 December 2013, that as of such date and based upon and subject to the factors and assumptions set forth in such opinion, the Consideration to be paid by AerCap for all of the outstanding shares of common stock of ILFC pursuant to the Share Purchase Agreement was fair from a financial point of view to AerCap.
The Board unanimously supports the Proposed Transaction, including the appointment of Robert H. Benmosche and David L. Herzog as non-executive directors, and recommends that AerCap’s shareholders and other persons entitled to vote exercise their voting rights at the EGM in favor of the Proposed Transaction, including the appointment of Robert H. Benmosche and David L. Herzog as non-executive directors.
The Boards of the Seller, AIG, and ILFC have resolved to enter into and support the Proposed Transaction, including the appointment of Robert H. Benmosche and David L. Herzog as non-executive directors, subject to the terms of the Transaction Agreements.
EXHIBIT A
Opinion of Goldman Sachs International
PERSONAL AND CONFIDENTIAL
December 16, 2013
Board of Directors
AerCap Holdings N.V.
Stationsplein 965
1117 CE Schipol Airport
Amsterdam
The Netherlands
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view to AerCap Holdings N.V. (the “Company”) of the: (a) US$3 billion in cash (as adjusted by the Dividend Adjustment (as defined below), the “Cash Consideration”) to be paid by AerCap Ireland Ltd (“AerCap Sub”), a wholly owned subsidiary of the Company, to AIG Capital Corporation (“AIG Sub”), a wholly owned subsidiary of American International Group, Inc. (“AIG”); and (b) 97,560,976 ordinary shares, par value €0.01 per share, of the Company (the “Company Shares”) to be issued by the Company to AIG Sub (the “Stock Consideration”), in each case pursuant to the share purchase agreement, dated as of December 16, 2013 (the “Agreement”), by and between the Company, AerCap Sub, AIG and AIG Sub, in connection with the purchase by the Company of all the outstanding shares of common stock (the “ILFC Shares”) of International Lease Finance Corporation (“ILFC”). In accordance with the Agreement, ILFC will pay the Special Distribution (as defined in the Agreement) in an aggregate amount of US$600 million plus €1 million at Completion (as defined in the Agreement) and the Cash Consideration shall be reduced by an amount equal to US$600 million of such Special Distribution (the “Dividend Adjustment”, and together with the Cash Consideration and the Stock Consideration, the “Consideration”).
Goldman Sachs International and its affiliates (“Goldman Sachs”) are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its employees, and funds or other entities in which they invest or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of the Company, AIG, ILFC and any of their respective affiliates and third parties, or any currency or commodity that may be involved in the transaction contemplated by the Agreement (the “Transaction”) for the accounts of Goldman Sachs and its employees and their customers. We have acted as financial advisor to the Board of Directors of the Company in connection with the Transaction. We expect to receive fees for our services in connection with the Transaction, all of which are contingent upon consummation of the Transaction, and the Company has agreed to reimburse our expenses arising, and indemnify us against certain liabilities that may arise, out of our engagement. We have provided certain investment banking services to the Company and its affiliates from time to time for which our Investment Banking Division has received, and may receive, compensation, including having acted as structuring agent in the sale of the Company’s equity interest in Aircraft Lease Securitisation Limited in November 2012. We also have provided certain investment banking services to AIG and its affiliates from time to time for which our Investment Banking Division has received, and may receive, compensation, including having acted as joint bookrunner in
Board of Directors
AerCap Holdings N.V.
December 16, 2013
Page 2
AIG’s sell-downs of its stake in AIA Group Ltd., a former affiliate of AIG, in March 2012 (aggregate amount $6,000,000,000) and September 2012 (aggregate amount $2,000,000,000); and as joint bookrunner in AIG’s offering of 4.875% notes (aggregate principal amount $750,000,000) in June 2012. We also have provided certain investment banking services to ILFC and its affiliates from time to time for which our Investment Banking Division has received, and may receive, compensation, including having acted as co-manager in the offering of ILFC’s 4.875% senior notes due 2015 and 5.875% senior notes due 2019 (aggregate principal amount $1,500,000,000) in March 2012; as joint lead arranger in ILFC’s refinancing of its $550,000,000 secured term loan in April 2012 and as joint bookrunner in the offering of 3.875% senior notes due 2018 and 4.625% senior notes due 2021 (aggregate principal amount $1,250,000,000) in March 2013. We may also in the future provide investment banking services to the Company, AIG, ILFC and their respective affiliates for which our Investment Banking Division may receive compensation.
In connection with this opinion, we have reviewed, among other things, the Agreement; annual reports to stockholders and Annual Reports on Form 20-F of the Company and Form 10-K of ILFC for the last three fiscal years ended December 31, 2012; certain interim reports to stockholders and Quarterly Reports on Form 6-K of the Company and Quarterly Reports on Form 10-Q of ILFC; certain other communications from the Company and ILFC to their respective stockholders; certain publicly available research analyst reports for the Company; audited financial statements for ILFC for the three fiscal years ended 31 December 2012; unaudited financial statements for ILFC for the nine month period ended 30 September 2013; certain internal analyses and forecasts for ILFC prepared by the management of ILFC; and certain internal analyses and forecasts for the Company and certain financial analyses and forecasts for ILFC, in each case as prepared by the management of the Company and approved for our use by the Company (the “Forecasts”), and certain cost savings and operating synergies projected by the management of the Company to result from the Transaction, as approved for our use by the Company (the “Synergies”). We have also held discussions with members of the senior management of the Company regarding their assessment of the strategic rationale for, and the potential benefits of, the Transaction and the past and current business operations, financial condition and future prospects of ILFC and the Company; reviewed the reported price and trading activity for the Company Shares; compared certain financial information for ILFC and certain financial and stock market information for the Company with similar financial and stock market information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the air leasing industry; and performed such other studies and analyses, and considered such other factors, as we deemed appropriate.
For purposes of rendering this opinion, we have, with your consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, us, without assuming any responsibility for independent verification thereof. In that regard, we have assumed with your consent that the Forecasts and the Synergies have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company. We have not made an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of ILFC, the Company or any of its subsidiaries and we have not been furnished with any such evaluation or appraisal. We have assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Company or ILFC or on the expected benefits of the Transaction in any
Board of Directors
AerCap Holdings N.V.
December 16, 2013
Page 3
way meaningful to our analysis. We also have assumed that the Transaction will be consummated on the terms set forth in the Agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to our analysis.
Our opinion does not address the underlying business decision of the Company to engage in the Transaction, or the relative merits of the Transaction as compared to any strategic alternatives that may be available to the Company; nor does it address any legal, regulatory, tax or accounting matters. This opinion addresses only the fairness from a financial point of view to the Company, as of the date hereof, of the Consideration to be paid by the Company for all of the outstanding ILFC Shares pursuant to the Agreement. We do not express any view on, and our opinion does not address, any other term or aspect of the Agreement or Transaction, any allocation of the Consideration or ongoing obligations of the Company or ILFC or any term or aspect of any other agreement or instrument contemplated by the Agreement or entered into or amended in connection with the Transaction, including, the fairness of the Transaction to, or any consideration received in connection therewith by, the holders of any class of securities, creditors, or other constituencies of the Company; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company or ILFC, or any class of such persons in connection with the Transaction, whether relative to the Consideration to be paid by the Company for all of the outstanding ILFC Shares pursuant to the Agreement or otherwise. We are not expressing any opinion as to the prices at which the Company Shares will trade at any time or as to the impact of the Transaction on the solvency or viability of the Company, ILFC or AIG or the ability of the Company, AIG or ILFC to pay their respective obligations when they come due. Our opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof and we assume no responsibility for updating, revising or reaffirming this opinion based on circumstances, developments or events occurring after the date hereof. Our advisory services and the opinion expressed herein are provided for the information and assistance of the Board of Directors of the Company in connection with its consideration of the Transaction and such opinion does not constitute a recommendation as to how any holder of shares of the Company should vote with respect to such Transaction or any other matter. This opinion has been approved by a fairness committee of Goldman Sachs.
Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Consideration to be paid by the Company for all of the outstanding ILFC Shares pursuant to the Agreement is fair from a financial point of view to the Company.
Very truly yours,
| GOLDMAN SACHS INTERNATIONAL |
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Managing Director
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