GE Shares Rally On Report Apollo Weighing $40 Billion Bid For Aircraft-Leasing Unit

GE shares surged more than 5% in after hours trade, building on an impressive YTD rebound, following a Bloomberg report that private equity giant Apollo has been talking to bankers about raising debt to buy part of GE's jet-leasing business, GE Capital Aviation Services, for up to $40 billion. The report comes after several analysts questioned the value of GE's aircraft leasing business following the recent bankruptcy of helicopter leasing company Waypoint Leasing, raising the possibility of a substantial writedown.

Apollo is reportedly looking to raise $30 billion in financing to purchase GE Capital Aviation Services as potential buyers weigh purchasing one of GE Capital's biggest and most profitable assets. An acquisition would go a long way toward dismantling what's left of the industrial giant's financing arm. After touching its financial crisis low of $6.66 on Dec. 12, GE shares have rebounded 13% so far this year, and were up 6% on Friday.

GE's aircraft leasing unit, one of the world's largest lessors of planes, has a fleet of almost 2,000 aircraft valued at about $40 billion. The unit expanded in 2015 after the $1.8 billion acquisition of Milestone Aviation, a helicopter lessor. Back in November, a research report by Gordon Haskett analyst John Inch prompted questions about the treatment of goodwill at Milestone after a peer helicopter lessor, Waypoint leasing filed for bankruptcy amid challenging industry conditions, prompting another leg lower in GE shares after he raised questions whether a writedown of the unit's goodwill might be forthcoming. 

Here's what we wrote at the time.

Why is this relevant to GE? Because as Inch also notes, in 2014 GE acquired Milestone Aviation - another provider of aircraft and helicopter leasing services- for $1.8 billion in 2014, and assuming the industrial behemoth has not since written down Milestone’s goodwill, the helicopter business would account for nearly 75 percent of GE Capital’s reported goodwill of $984 million at third quarter of 2018, the analyst added according to Bloomberg.

"A write-down of its Milestone assets could prove highly material to GE Capital," Inch said.

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