Sumitomo Mitsui Financial Group, Inc.(Code: 8316)

Sumitomo Mitsui Finance and Leasing Company, Limited.

Sumitomo Mitsui Banking Corporation

Sumitomo Corporation (Code: 8053)

 

Completion of Acquisition of Aircraft Leasing Business

from The Royal Bank of Scotland Group plc and

Commencement of Operation as SMBC Aviation Capital

 

June 4, 2012 --- Sumitomo Mitsui Banking Corporation (SMBC; President: Takeshi Kunibe) and Sumitomo Mitsui Finance and Leasing Company, Limited (SMFL; President: Yoshinori Kawamura), both subsidiaries of Sumitomo Mitsui Financial Group, Inc. (SMFG; President: Koichi Miyata), and Sumitomo Corporation (SC; President and CEO: Susumu Kato), through the consortium composed by these companies, completed the acquisition of the aircraft leasing business from The Royal Bank of Scotland Group plc (RBS; Group Chief Executive: Stephen Hester) on June 1, 2012 (GMT), pursuant to the agreement with RBS on January 16, 2012, and commenced its operation as “SMBC Aviation Capital.”

 

In addition, on June 1, 2012, SMFL established “Aviation Capital Dept.” as a department for managing the acquired company, and “Aircraft Credit Dept.” as a department specialized in screening and monitoring aircraft leasing transactions. At the same time, SMBC established “Aviation Capital Dept.” within Planning Dept., International Banking Unit for the management of the acquired companies. Together with SMFL and SMBC, SC will contribute to developing the business and strengthening management systems by transferring staff to SMFL’s Aviation Capital Dept. and Aircraft Credit Dept.

 

The aircraft leasing industry expects the demand for commercial aircraft to continue to grow steadily, underpinned by the increasing volume of air travellers on the back of the growth of emerging markets, especially in Asia, and the rapid growth of low cost carriers (LCCs). Against this backdrop, the consortium acquired RBS’s aircraft leasing unit, the fourth largest player in the world in terms of book value, and intends to integrate the existing aircraft leasing business of SMFL Aircraft Capital Corporation B.V., the joint venture between SMFL and SC, into the acquired business within a year, in order to further expand and develop the business in Asia and other emerging markets. This will result in the consortium operating one of the top-tier aircraft leasing business in the world, with the third largest number of owned and managed aircraft in aggregate.

 

Furthermore, the consortium has been exploring stable long-term funding sources for this acquisition and its continuous growth in light of the current uncertainty in the financial markets and the size of this acquisition.  As a result, it is highly probable that the consortium will fund from the facility of The Japan Bank for International Cooperation, Japan’s government-affiliated financial institution, namely “Japanese Government's Fund for Responding to Yen Appreciation.”

 

Both groups, SMFG and SC, will continue their concerted efforts to further strengthen the aircraft leasing business and offer higher-value-added financial services to the airline industry and aircraft manufacturers in both domestic and foreign markets by leveraging their many advantages, such as a sound financial position, ability to provide sophisticated financial solutions, broad global client base, and advanced risk management practice.

 

Overview of the transaction

(1) Companies engaged in the acquired aircraft leasing business

·         RBS Aerospace Limited (to be renamed as “SMBC Aviation Capital Limited” in June, 2012)

·         RBS Aerospace (UK) Limited (to be renamed as “SMBC Aviation Capital (UK) Limited” in June, 2012)

·         RBS Australia Leasing Pty Limited (to be renamed as “SMBC Aviation Capital (Australia) Pty Limited in June 2012)

 

(2) Acquisition price

Approx. USD 7.3 billion in total

Note: This figure will be adjusted based on the assets and liabilities of the acquired business as of May 31, 2012.

 

(3) Ownership percentage after the acquisition

For each company listed above (1), SMFL, SMBC and SC hold 60%, 30% and 10% of the stake, respectively