DO NOT USE UNDER ANY CIRCUMSTANCES -- IMAGE MUST BE DOWNLOADED AGAIN FROM CPBayne Stanley/The Canadian Press
ACE Aviation Holdings Inc. has taken advantage of the hot equity market and unloaded more of its stake in Air Canada , reducing its ownership to just 11.15 per cent through a bought deal.
The deal is driven by Air Canada's soaring stock price. Since July 1, the Class B shares are up 127 per cent. For comparison, the S&P/TSX is up about 17 per cent.
Strong earnings have propelled the shares upward. Third quarter results came out in November and earnings before interest and taxes came in at $327-million, the strongest quarterly performance in three years. International travel was one of the bright spots, with revenue per available seat mile up almost 25 per cent for Pacific travel.
Now the looming question is what happens to the rest of ACE's position? On the last quarterly conference call management implied that the entire position could be sold off imminently. And upon hearing news of the deal this morning, BMO Nesbitt Burns analyst Claude Proulx noted that "although this deal does not fully remove the overhang, we suspect that ACE could end up selling the remaining 31 million shares if the demand for this deal were sufficient."
ACE has been breaking its ties to Air Canada for some time now. In August the company announced Air Canada had paid back about $157-million to terminate a loan arranged when Air Canada raised a total of $1-billion from several parties in July 2009 to weather a rough year for travel.
Friday's bought deal is worth $163-million and reduce ACE's position to 11.15 per cent of Air Canada's Class A variable voting shares and Class B voting shares combined. The offering came at a 3.4 per cent discount and was led by Canaccord Genuity.
Tim Kiladze