What happened

Shares of Fly Leasing (FLY) climbed 25% higher on Monday morning after the aircraft lessor agreed to be acquired by Carlyle Group (CG). It's the second major deal involving aircraft lessors this year, and Carlyle is offering a sizable premium to get the deal done.

So what

Terms of the deal call for Fly Leasing holders to receive $17.05 per share in cash, a 29% premium to the stock's Friday close. The deal values Fly Leasing equity at $520 million, but the deal is worth about $2.36 billion if you include the amount of debt Carlyle will assume.

Planes parked on the tarmac.

Image source: Getty Images.

Fly Leasing is in the business of buying airplanes and leasing them back to airlines. The practice was popular among airlines even prior to the pandemic because it allowed carriers to operate more asset-light, and is expected to only grow in popularity in the years to come because airlines have been forced to take on added debt to survive the crisis brought on by the coronavirus pandemic.

Carlyle already operates a leasing portfolio with 246 aircraft owned. The deal would add 84 aircraft to its total.

The deal comes just two weeks after AerCap Holdings agreed to acquire the GECAS unit of General Electric, combining the two largest aircraft leasing portfolios. I said at the time the scale of the deal could force other lessors to join forces.

Now what

Fly was rumored to be on the block prior to the AerCap/GE deal, and the price seems attractive given the company's relatively aging, undesirable fleet of aircraft. Given the strong premium, Carlyle's ample resources, and talk that Fly shopped itself to a wide number of potential buyers, it seems unlikely there will be a competing bid.

Fortunately for investors, even if Fly leaves the public markets there are still strong companies like AerCap and Air Lease traded on the stock exchange.