By Doug Cameron And Maria Armental 

China's HNA Group on Thursday agreed to buy aircraft lessor Avolon Holdings Ltd. for about $2.6 billion, outbidding a state-owned suitor and highlighting the country's continuing thirst for new passenger jets.

The agreed deal, with an enterprise value of $7.6 billion, follows a rare yearlong skirmish among Chinese firms for one of the largest jet lessors at a time when airlines increasingly opt to rent rather than buy jets to conserve cash, and Chinese carriers prepare for a binge of new orders.

HNA's Bohai Leasing unit agreed to pay $31 in cash for each Avolon share, two months after a plan to acquire a minority stake triggered a rival takeover offer from state-controlled Avic Capital Co., which last year tried to buy the Ireland-based company.

Avolon owns and manages 259 jets, and with China set to overtake the U.S. as the world's largest domestic aviation market, companies including Bank of China and Industrial & Commercial Bank of China have bought aircraft lessors or financed more jet deals to expand their exposure to the sector.

Domhnal Slattery, Avolon's founder, will remain with the company, alongside other senior executives.

Chinese carriers are forecast to order around 6,330 jets over the next two decades worth nearly a trillion dollars at list prices, according to the latest from Boeing Co.

Mr. Slattery is part of a small cadre of Irish-born executives who dominate the jet-rental business, a legacy of the country's favorable tax treatment of the sector and the early leadership role of Guinness Peat Aviation, whose main assets were bought by General Electric Co., and AerCap Holdings NV, which bought the aircraft leasing unit of American International Group Inc. GE and AerCap dominate the industry, with fleets of more than 1,000 jets.

Avolon, launched in May 2010 with private-equity backing, went public in December for $20 a share

In July, Bohai had agreed to pay $429 million, or $26 a share, for a 20% stake in the Dublin-based company. It raised its offer last month to $31 a share after another bidder emerged.

On Thursday, Avolon said the price of $31 a share "reflects significant volatility across global equity markets."

The aircraft lessor listed on the New York Stock Exchange this past December following the collapse of takeover talks with potential buyers in Asia.

Private-equity-controlled Avolon has commitments for more than 100 planes. Bohai had previously committed to acquire the Avolon shares for $26 each, a 14.5% premium to its average share price at the time.

Write to Doug Cameron at doug.cameron@wsj.com and Maria Armental at maria.armental@wsj.com

 

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(END) Dow Jones Newswires

September 03, 2015 23:00 ET (03:00 GMT)

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