SMBC Aviation Captial logo is seen displayed in this illustration taken, May 4, 2022.
SMBC Aviation Captial logo is seen displayed in this illustration taken, May 4, 2022. Reuters / DADO RUVIC

SMBC Aviation Capital agreed on Monday to buy smaller rival Goshawk Aviation for an enterprise value of $6.7 billion in a deal it said would make it the world's second largest aircraft lessor by number of aircraft.

The acquisition to create a combined company with 37 billion euros ($38.45 billion) in assets comes six months after Ireland's AerCap Holdings NV consolidated its position as the world's largest aircraft lessor through its takeover of General Electric's leasing business.

SMBC, which is owned by a consortium including Japan's Sumitomo Corp and Sumitomo Mitsui Financial Group, said it will take over a portfolio of 176 owned and managed aircraft to bring its total fleet to 709.

With 261 more Boeing and Airbus aircraft on order, SMBC's fleet will outnumber the 832 fellow Dublin-headquartered Avolon either own, manage or have on order.

Reuters reported on Friday that SMBC and Goshawk were nearing a deal that could be announced as soon as this week.

"We are undertaking this transaction at a strategic point in the cycle with a strong recovery building across the global airline industry and we expect the transaction to be accretive to SMBC Aviation Capital's return on capital," SMBC Chief Executive Officer Peter Barrett said in a statement.

SMBC will finance the deal through a combination of debt and equity. Young, narrowbody aircraft, which it hopes to drive its growth, will represent over 82% of the combined fleet, it added.

The six Goshawk-owned aircraft that are located in Russia and subject to EU sanctions are excluded from the transaction.

Dublin-based Goshawk, a 50-50 joint venture between Hong Kong-based conglomerate NWS Holdings Ltd and Chow Tai Fook Enterprises Ltd, was set up less than a decade ago and its shareholders said it was selling at an attractive valuation.

Last year's $30 billion AerCap acquisition was widely predicted to spur further consolidation in a sector that finances over half of the world's passenger jet output, in deals worth around $150 billion of aircraft every year.

($1 = 0.9624 euro)