Mr David Bonderman's investment vehicle, the Texas Pacific Group, is to become a major investor in the GPA Group, taking a stake of up to 47.7 per cent under a new restructuring package.
In a complex arrangement, Texas Pacific will tender for 60.9 million GPA shares for $115 million (£77 million), subject to shareholder approval. Under the deal, shareholders who opt to sell their stake will be paid $1.56 a share. In addition, Texas Pacific will subscribe for an extra 12.8 million new shares at the same price.
If fewer than 19.2 million ordinary shares are tendered for sale, GPA has undertaken to issue additional new shares to give Texas Pacific a minimum of 32.1 million shares or 18 per cent of the group to become GPA's largest shareholder.
However, it appears likely that significantly more GPA shareholders will accept the offer.
Under the agreement no less than $20 million will be invested directly in the group.
GPA chief executive Mr Patrick Blayney said the deal threw a lifeline to its long-suffering shareholders and was optimistic it would be approved. The price of $1.56 a share is substantially better than the 60 cents a share which GE Capital must pay to shareholders if it exercises its option of 24.9 per cent of the group in 2001.
"We believe it will be very positively received by shareholders. The board is recommending the transaction as offering a fair price and it is up to shareholders then to decide whether to accept," he said yesterday.
The tender offer provides liquidity for shareholders, which include Air Canada (12 per cent), Aer Lingus (10 per cent), Prudential Insurance of America (7.7 per cent) and its founder, Dr Tony Ryan (7 per cent).
GPA's current board and management are precluded from participating in the tender. Instead, they will tender for a further 3.7 million shares at $1.56 per share and new ordinary shares will be issued to individuals where an insufficient number of shares are tendered, it said.
The deal follows an agreement with GE Capital reached earlier this year to restructure the US company's option to acquire up to 90 per cent of the aircraft leasing company for $65 million at any time up to 2001. Under the revised arrangements, GE Capital will retain an option to purchase up to 35.3 million new ordinary shares at 60 cents each until October 2001.
The deal must get 75 per cent approval from GPA shareholders at an extraordinary general meeting next month. Following this, the company will be renamed the AerFi group.
"The restructuring should provide significant liquidity and value for GPA's shareholders as well as an opportunity for the company to work together with Texas Pacific to develop its business," Mr Blayney said.
Texas Pacific is a private investment partnership established by Ryanair chairman Mr Bonderman. Based at Fort Worth, Texas, it has offices in San Francisco and London and has capital of more than $3 billion.
The partnership specialises in significant private equity investments across a range of industries, It has significant investments in US airlines Continental and American West. Its other investments include Del Monte, Virgin Entertainment and Globespan.
If the deal goes ahead, Texas Pacific will appoint three board members to AerFi, including Mr Bonderman. Mr Blayney said the involvement of Texas Pacific was a tremendous vote of confidence in the company.
Announcing the agreement, Texas Pacific's principal, Mr Jeremy Ferris, said it presented a great opportunity to participate in a rapidly changing industry.
"GPA is already an industry leader, enjoys a strong balance sheet, significant critical mass, and an enviable reputation for structuring and closing complex financings. We see this as a natural extension of Texas Pacific's airline-related focus."
Mr Blayney has had a working relationship with Mr Bonderman for many years. They first met in 1993 during the America West bankruptcy. GPA was the single biggest creditor to the airline at that time and eventually backed Mr Bonderman's rescue package. Mr Blayney was the executive charged with handling GPA's exposure to America West then. "The key part of the transaction is that it will provide liquidity for shareholders. We spoke to a number of potential investors and Texas Pacific emerged as the best investor offering the best possible terms for shareholders," Mr Blayney said.
If shareholders fail to participate in the tender to the levels expected, Texas Pacific will end up with an 18 per cent stake in AerFi instead of 47.7 per cent. Mr Blayney insists that such a scenario would not impede the group's future progress.
"If no shareholders tender shares it would have no impact on the company. It would still have $50 million invested directly in GPA, giving it more capital."
The successful conclusion of the deal with Texas Pacific would leave the company with net cash of $437 million - almost equal to its current debt levels.
