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A financial investor, not a rival airline, is likely the suitor of Halifax-based aircraft lessor and operator Chorus Aviation, which on Friday said it had received a takeover offer from an unnamed bidder, analysts say.

Chorus’s share price on Monday gave back some of the gains it made on Friday, when its stock shot up by 34 per cent as the company said it had received a “preliminary, non-binding acquisition proposal from a third party that is subject to a number of significant conditions.”

The shares fell by 4 per cent to close at $3.05 on the Toronto Stock Exchange, giving Chorus a market value of $515-million. That is much less than the price of about $8 at the beginning of the year, before the COVID-19 pandemic upended the global economy and collapsed demand for air travel.

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Chorus, which bills itself as Canada’s largest regional airline, leases 56 aircraft to global carriers and operates about 70 planes as charter airline Voyageur Aviation and as Jazz Aviation, a regional carrier that flies as Air Canada Express.

Walter Spracklin, a Royal Bank of Canada stock analyst, said he is not surprised Chorus is a takeover target, with its attractive valuation, unique business model and “generally resilient cash flow.” In a note to clients, Mr. Spracklin said he believes the unnamed bidder is a domestic financial investor, rather than a rival airline operator, given the sorry state of the aviation industry and Canada’s 49-per-cent foreign ownership cap in air carriers. Individual foreign shareholders are limited to 25 per cent.

Konark Gupta, a Bank of Nova Scotia analyst, said Chorus’s plane-leasing business would be attractive to private equity firms, aircraft lessors, pension funds or fixed-income investors. “We think the potential bidder has to be a Canadian entity to acquire 100 per cent of [Chorus], otherwise the airline operations may be left out of the transaction for potential sale to Canadian entities,” Mr. Gupta said.

Chorus earns a majority of its revenue from Air Canada, on whose behalf it flies Jazz domestic flights and cross-border routes to the United States, in addition to operating Canadian regional airports. Air Canada last year extended its capacity purchase agreement with Chorus until 2035 and invested $100-million in Class A and B shares at $6.25 apiece, which made it a 10-per-cent owner. “The 17-year contract will provide Jazz $2.5-billion in minimum contracted revenues, of which $1.6-billion ... will be generated from aircraft leasing revenue,” Air Canada said at the time.

Air Canada said Monday it is not the bidder for Chorus.

Chorus did not respond to two interview requests on Monday. “There can be no assurance that any transaction will occur or as to the timing, structure or terms of any transaction. Chorus does not intend to make further comment unless or until there is a transaction to announce,” the company said in a statement Friday.

For its second quarter ended June 30, Chorus had revenue of $184-million, down from $332-million in the same period in 2019. Profit for the quarter was $29-million, or 18 cents a share, compared with $38-million (25 cents).

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Chorus’s fleet consists of regional jets and turboprop aircraft, including the Airbus A220, De Havilland Dash 8 and Bombardier CRJ.

As the pandemic hammered demand for air travel, Chorus laid off 3,000 of its 4,800 employees and accepted a loan of up to $200-million from Export Development Canada, a federal government agency.

Three of Chorus’s customer airlines, Ireland’s CityJet, Aeromexico and Virgin Australia, have either sought creditor protection or terminated aircraft leases in recent months.

On June 30, Air Canada said it’s ending operations at eight regional airports, including North Bay, Ont., and Bathurst, N.B., all of which it paid Chorus to run. Air Canada also cancelled 30 regional routes – 21 of which Chorus flew as Jazz.

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