Air Canada stock closed up 5.9% at C$27.27 on Tuesday, its highest level since July 2021, after the airline announced a deal to sell a 25% stake in its Aeroplan loyalty program for nearly US$2 billion.
The buyers are a consortium led by Blackstone and Quebec pension fund La Caisse. PSP Investment and the British Columbia Investment Management Corporation are also part of the group.
The transaction values Aeroplan at C$10 billion, or roughly US$7.2 billion. That number caught analysts off guard. Bank of Nova Scotia analyst Konark Gupta called it a “significantly higher value” than the market had assumed, and upgraded the stock to sector outperform.
Air Canada’s market cap sits at around $7.6 billion, so the implied Aeroplan valuation is a big deal relative to the size of the company.
Air Canada CFO John Di Bert said the deal “strengthens Air Canada’s financial position by unlocking value from Aeroplan while retaining full operational control.” He added that it supports the airline’s push toward an investment-grade credit rating.
Right now, Moody’s, S&P Global, and Fitch all rate Air Canada debt as speculative grade. The airline is carrying C$12.79 billion in long-term debt and lease liabilities on its balance sheet.
Proceeds from the Aeroplan sale will go toward repaying an upcoming billion-dollar bond maturity, with the rest used to reduce debt further.
Aeroplan has over 10 million active members, equal to about a quarter of Canada’s population. Members earn points through Air Canada flights and co-branded credit cards, then redeem them for travel or other goods. The Freddie Awards named it the best loyalty travel program in the Americas this year.
Air Canada originally spun Aeroplan off as a public company during a bankruptcy restructuring. It bought it back in 2019 for C$497 million in cash, plus around C$2 billion in assumed liabilities tied to unredeemed points.
Air Canada also reported second-quarter results on Tuesday. Adjusted earnings came in at C$0.40 per share, well above the C$0.15 analyst estimate tracked by FactSet.
RBC Capital Markets analyst James McGarragle noted that even under a worst-case scenario where Air Canada sells a 49% stake, Aeroplan would be valued at around US$4 billion.
Blackstone managing director Mark Rutledge called Aeroplan “an industry-leading loyalty platform” and said the firm is “a long-term believer in Canada as a compelling place to invest.”
Scotia analyst Gupta flagged that fuel price volatility remains a near-term risk, but said the Aeroplan deal should outweigh that concern for investors.
Air Canada stock closed Tuesday at C$27.27.
The post Air Canada (AC) Stock Jumps 6% as Blackstone Buys 25% of Aeroplan for $2 Billion appeared first on CoinCentral.
