Mitsubishi UFJ Lease to Purchase Jackson Square Aviation

Mitsubishi UFJ Lease & Finance Co. (8593) agreed to buy Oaktree Capital Group LLC (OAK)’s Jackson Square Aviation LCC for 100 billion yen ($1.3 billion) to add about 70 planes to its commercial-aircraft fleet.

The purchase will be completed in December, Tokyo-based Mitsubishi UFJ Lease said in a statement today. The lessor, an affiliate of Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest publicly traded bank, will do the deal by buying Jackson Square’s parent JSA International Holdings LP.

Japanese banks are targeting plane-leasing and expansion overseas as a shrinking population saps demand at home and because a stronger yen has made foreign assets cheaper to buy. Sumitomo Mitsui Financial Group Inc. (8316) completed the $1.2 billion purchase of Royal Bank of Scotland Group Plc’s plane-leasing unit in June.

“Expansion prospects in Japan are limited,” said Shiro Yoshioka, a Tokyo-based analyst at Japaninvest Group Plc. “The stronger yen is also helping boost purchasing power.”

Jackson Square has 76 planes valued at more than $4 billion, the San Francisco-based lessor said in a statement. The jets are in service with carriers including Air France-KLM Group (AF), Emirates and Virgin America Inc., according to aviation- data provider Ascend. The company’s fleet is predominately narrow-body Boeing Co. and Airbus SAS planes, Ascend said.

Management Team

The lessor has “at the core of its business, a management team with expertise in the industry,” Mitsubishi UFJ Lease said. Jackson Square, named after the San Francisco district where it’s based, began operating in 2010 after Oaktree committed $500 million in equity to Richard Wiley, Toby Bright and Scott Weiss.

The trio founded Pegasus Aviation Finance Co., sold it in 2007 to Terra Firma Capital Partners Ltd. and then created Sky Holding Co., which was renamed Jackson Square with Oaktree’s involvement. Wiley had worked with Oaktree since the mid-1990s, doing more than $6 billion in aircraft transactions through Pegasus. Bright had been Boeing’s commercial-plane sales chief.

“Having the support of another major international financial services company enables us to continue to provide our airline customers with new capital to finance their next- generation deliveries,” Wiley said in the statement.

Mitsubishi UFJ Lease owns four Boeing planes, according to Ascend. The company leases assets including machine tools, computers, cars and real estate, according to its website.

Shares Rise

The lessor jumped 3 percent to 3,395 yen at the close in Tokyo. The shares have gained 11 percent this year. Mitsubishi UFJ Financial holds a 9.2 percent stake, according to data compiled by Bloomberg.

The deal “is in line with Mitsubishi UFJ Financial Group’s business strategy to expand global assets,” said Hironori Imafuku, a spokesman for the Tokyo-based bank. Leasing “is one of our business pillars in addition to banking, brokerage, trust banking and credit-card services.”

Japanese companies announced $51.7 billion of overseas takeovers last year, according to data compiled by Bloomberg. This year, $31.1 billion of deals have been announced, led by Marubeni Corp.’s $5.6 billion purchase of U.S. grain merchandiser Gavilon Group LLC. The yen has gained 6 percent against the dollar in the past two years, according to data compiled by Bloomberg.

Lease Expansion

The jet-leasing industry has been growing since its birth in the 1970s, and about 35 percent of the global fleet is now leased rather than owned, up from 25 percent in 2000, according to a Fitch Ratings report in July. Airlines will take 34,000 new planes valued at $4.5 trillion through 2031, according to Boeing. That’s a 1.5 percent increase from a 33,500-jet estimate a year earlier.

Jackson Square specializes in sale-leaseback deals, functioning as a third-party financier. In such transactions, airlines order jets, getting discounts off the purchase price, and then seek to preserve cash by selling the planes to lessors and signing operating leases instead.

Competitors include units of General Electric Co. (GE), American International Group Inc. (AIG) and CIT Group Inc. (CIT), as well as independent companies such as Air Lease Corp. (AL) and AerCap Holdings NV. (AER)

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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