Summary
General Electric Company (GE) has announced the completion of its previously disclosed combination of its GE Capital Aviation Services (GECAS) business with AerCap Holdings N.V. This significant transaction involved a total consideration of $22.6 billion in cash, approximately 46% ownership in AerCap valued at $6.6 billion, and $1 billion in AerCap senior notes. The divestiture of GECAS is a key step in GE's strategy to reduce debt, with the company now expecting to achieve a total debt reduction of approximately $75 billion since the end of 2018. The historical results of GECAS will be reported as discontinued operations, and GE will report its remaining interest in AerCap as an equity method investment, measured at fair value and recognized in continuing operations. This transaction marks a substantial reshaping of GE's financial structure and business portfolio. Investors should note that GE will transition to a simpler one-column financial statement reporting format with its 2021 Annual Report on Form 10-K, which will include the remaining GE Capital segments (Energy Financial Services and run-off insurance operations) under Corporate. While this 8-K provides pro forma financial information, GE also furnished supplemental information to aid in evaluating the transition to the new reporting format.
Key Highlights
- 1Completion of GECAS business combination with AerCap for a total consideration of $22.6 billion cash, AerCap shares (approx. 46% ownership), and $1 billion in AerCap senior notes.
- 2Expectation to use GECAS proceeds to further reduce debt, targeting total debt reduction of approximately $75 billion since the end of 2018.
- 3GECAS historical results will be reported as discontinued operations, with GE deconsolidating the business upon transaction completion.
- 4GE will account for its AerCap investment using the equity method, measured at fair value and reported in continuing operations.
- 5GE to adopt a simpler one-column financial statement reporting format starting with its 2021 Annual Report on Form 10-K.
- 6Estimated pre-tax loss of $3.1 billion ($3.7 billion after tax) expected from the GECAS transaction after transaction costs of $0.3 billion.
- 7GE to nominate two board members to AerCap's board while owning at least 10% of its shares, and one member thereafter as long as any shares are owned.