Air Lease Acquisition Offer Under Scrutiny Amid Shareholder Value Debate

Air Lease Corporation Agrees to Acquisition, Shareholder Value Debated

Air Lease Corporation (NYSE: AL) has entered into a definitive agreement to be acquired by a consortium led by Sumitomo Corporation, SMBC Aviation Capital Limited, and investment vehicles affiliated with Apollo managed funds and Brookfield. The proposed all-cash transaction values Air Lease at $65.00 per share, representing an equity valuation of approximately $7.4 billion, and a total enterprise value, including debt, of approximately $28.2 billion.

The Acquisition Terms in Detail

The $65.00 per share cash consideration offers a 7% premium over Air Lease’s all-time high closing stock price on August 28, 2025. It also represents a 14% premium over the volume-weighted average share price during the 30 trading days ending August 29, 2025, and a notable 31% premium over the 12-month trading period ending August 29, 2025. The acquiring entity is a newly formed Dublin-based holding company, with SMBC Aviation Capital slated to manage Air Lease’s substantial order book of approximately 450 outstanding aircraft orders. The transaction has received unanimous approval from Air Lease’s Board of Directors and is expected to close in the first half of 2026, pending regulatory and shareholder approvals.

Analysis of Shareholder Sentiment and Market Reaction

While the offer provides immediate liquidity and a significant premium over recent trading averages, the market’s reaction suggests a nuanced view of the shareholder value delivered. Some analysts and investors perceive the $65 offer as "not compelling" or "underwhelming" for current AL shareholders, despite aligning with the company’s book value. This sentiment stems from the belief that the offer reflects historically thin gain-on-sale margins for Air Lease and undervalues its younger fleet.

The aircraft leasing business is capital-intensive, making the cost of debt a critical factor. The current macroeconomic environment, marked by the commencement of a new interest rate-cutting cycle by the Federal Reserve, could significantly improve Air Lease’s net margins by reducing its cost of debt. Air Lease’s composite cost of debt stood at 4.3% at the end of Q2, and a continued decline in interest rates could bring this closer to competitors like AerCap, which currently has a lower cost of debt at 4.1%. This potential for improved profitability suggests that the intrinsic value of Air Lease could theoretically be higher in a declining interest rate environment.

Broader Context and Industry Implications

The proposed acquisition highlights a strategic move towards consolidation within the aircraft leasing sector. However, the valuation metrics raise questions. The deal values AL at an enterprise value-to-EBITDA (EV/EBITDA) ratio of approximately 10.8x, based on a total transaction value of $28.2 billion and peak 2025 EBITDA of $2.624 billion. This significantly exceeds the industry average EV/EBITDA of 5x. This elevated multiple implies a high degree of optimism regarding future cash flows, particularly in a sector sensitive to interest rate fluctuations and aircraft demand cycles. The company’s current price-to-earnings (P/E) ratio of 7.73, while lower than its 10-year average of 9.13, reflects market caution regarding risks such as rising debt costs.

For the acquiring consortium, which includes $12 billion in committed financing, the total debt load of the combined entity, including AL’s existing $21.7 billion debt, suggests a highly leveraged structure. This could amplify risks if interest rates were to unexpectedly reverse course. The integration of AL’s substantial order book, focused on liquid, new technology aircraft like the Airbus A320neo family and Boeing 737 MAX, into SMBC Aviation Capital’s portfolio will be a key factor in the success of the consolidated entity.

Notably, AerCap, the world’s largest aircraft lessor, is considered an unlikely counter-bidder. AerCap’s acquisition strategy typically favors distressed sellers and discounts to book value, a profile that Air Lease does not fit, despite the perceived undervaluation by some AL shareholders.