October 14, 2014 / 12:50 AM / 6 years ago

UPDATE 2-GE aircraft unit to buy helicopter lessor Milestone for $1.78 bln

(Adds details, background)

Oct 13 (Reuters) - General Electric Co’s aircraft leasing unit announced plans on Monday to buy Dublin-based helicopter leasing company Milestone Aviation Group for $1.78 billion, branching out into an area tipped for solid growth in coming years.

Milestone, co-founded by NetJets Inc founder Richard Santulli in 2010, owns a fleet of helicopters worth $2.8 billion and has placed orders worth $3 billion.

The company’s helicopters are primarily used in offshore oil and gas industries and for search, rescue and emergency medical services.

“The addition of Milestone will deepen our domain expertise in aviation and oil and gas, two critical GE industries,” GE Capital Chief Executive Keith Sherin said in a statement on Monday.

The move confirms plans first outlined in March, when the head of GE Capital’s aviation arm told Reuters in an exclusive interview that it could spend some $2 billion on diversifying into helicopter leasing and as much again on shipping.

The world’s largest aircraft lessor aims to carry out the diversification partly because of concerns over the value of some current-generation jets, Norman Liu, chief executive of GE Capital Aviation Services, said in the interview.

The acquisition also, however, comes at a time when GE is trying to reduce exposure to financing and increase profits from its industrial businesses.

GE CEO Jeff Immelt has said he planned to boost earnings contribution from the company’s industrials businesses to 75 percent by 2016 from 55 percent last year.

The company spun off its North American private label credit card business, Synchrony Financial, earlier this year.

The Milestone transaction is expected to close next year.

Leasing has long been an integral part of the passenger jet industry, accounting directly or indirectly for up to 40 percent of the aircraft delivered from Airbus or Boeing factories.

Now, the leasing model is increasingly taking hold in the helicopter industry, with leasing firms attracted by the flexibility of the machines and their tendency to hold their value, according to U.K.-based consultancy Ascend Flightglobal.

Airbus Helicopters, formerly known as Eurocopter, the world’s largest maker of civil helicopters, predicted earlier this year that leasing was set for expansion in the sector.

The diversity of roles served by helicopters and a sustained period of high oil prices mean that they have not been as exposed as many industries to the global economic slowdown, Ascend said in a published report earlier this year. (Reporting by Sagarika Jaisinghani in Bangalore, Tiim Hepher in Paris; Editing by Ted Kerr, Joyjeet Das and Kenneth Maxwell)

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