Chorus to be sold ?

[hithere]

Fanblade
Could you please paste the relevant sections of “Merger or change of control “ for us Jazz pilots? It would obviously be of interest to Transat pilots

[rudder]

AC says the offer didnt come from them. I guess you can put away the balloons.

https://www.theglobeandmail.com/busines ... ed-chorus/

Its probably a PE firm. Could get pretty bleak.

So ‘unsolicited’ could also be construed as ‘hostile’?

If CHR and the potential acquirer do not reach terms, then the potential acquirer could still try to take up shares without a BOD recommendation. However, the CHR BOD (with the support of the shareholders) could dilute the stock using the poison pill provision adopted in April 2020.

With a massive stock price drop mostly related to the suspension of the dividend, CHR knew then that they might become a takeover target.

Lots of hedge funds out there looking for opportunities (remember Cerberus?). Their ROI was 300% in the AC restructuring which gutted AC by selling off all of the other former AC assets via ACE.

Ultimately, it will be up to the CHR shareholders to decide if they want to sell. The CHR BOD has a fiduciary obligation to maximize shareholder value, including sale. What the buyer wants to do with the assets rarely factors in to that decision. It will be a competition between those that believe the CHR stock price will eventually recover and that the dividend will eventually be restored, and those that do not.

The offer may have come with some onerous or unrealistic conditions. However, the CHR BOD has an obligation to consider, particularly if it represents a higher return for shareholders than status quo.

An auction scenario remains a possibility.

With AC having a seat on the CHR BOD, it will be having direct input in to this process and perhaps the outcome as a 10% shareholder.

[JoeyBarton]

AC says the offer didnt come from them. I guess you can put away the balloons.

https://www.theglobeandmail.com/busines ... ed-chorus/

Its probably a PE firm. Could get pretty bleak.

So ‘unsolicited’ could also be construed as ‘hostile’?

If CHR and the potential acquirer do not reach terms, then the potential acquirer could still try to take up shares without a BOD recommendation. However, the CHR BOD (with the support of the shareholders) could dilute the stock using the poison pill provision adopted in April 2020.

With a massive stock price drop mostly related to the suspension of the dividend, CHR knew then that they might become a takeover target.

Lots of hedge funds out there looking for opportunities (remember Cerberus?). Their ROI was 300% in the AC restructuring which gutted AC by selling off all of the other former AC assets via ACE.

Ultimately, it will be up to the CHR shareholders to decide if they want to sell. The CHR BOD has a fiduciary obligation to maximize shareholder value, including sale. What the buyer wants to do with the assets rarely factors in to that decision. It will be a competition between those that believe the CHR stock price will eventually recover and that the dividend will eventually be restored, and those that do not.

The offer may have come with some onerous or unrealistic conditions. However, the CHR BOD has an obligation to consider, particularly if it represents a higher return for shareholders than status quo.

An auction scenario remains a possibility.

With AC having a seat on the CHR BOD, it will be having direct input in to this process and perhaps the outcome as a 10% shareholder.

So what kind of timeline are we looking at here?

[altiplano]

AC says the offer didnt come from them. I guess you can put away the balloons.

https://www.theglobeandmail.com/busines ... ed-chorus/

Its probably a PE firm. Could get pretty bleak.

For anyone that can't get past the Globe's paywall...

Financial company likely the unnamed bidder for Halifax-based Chorus Aviation
ERIC ATKIN S
TRANSPORTATION REPORTER


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.

STORY CONTINUES BELOW ADVERTISEMENT

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).

STORY CONTINUES BELOW ADVERTISEMENT

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.

[genetic jack hammer]

AC says the offer didnt come from them. I guess you can put away the balloons.

https://www.theglobeandmail.com/busines ... ed-chorus/

Its probably a PE firm. Could get pretty bleak.

For anyone that can't get past the Globe's paywall...

Financial company likely the unnamed bidder for Halifax-based Chorus Aviation
ERIC ATKIN S
TRANSPORTATION REPORTER


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.

STORY CONTINUES BELOW ADVERTISEMENT

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).

STORY CONTINUES BELOW ADVERTISEMENT

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.

...including the Airbus A220..????

[rudder]

...including the Airbus A220..????

Chorus Aviation Capital (leasing division) not Jazz.

[genetic jack hammer]

Got it, thx

[rudder]

So what kind of timeline are we looking at here?

Days or weeks, not months.

CHR may simply announce that no agreement was reached (offer rejected or withdrawn).

There may be a period where CHR does due diligence on the offer presented. There may be a period of negotiation that results in a modified offer with BOD support.

The AC/TRZ transaction is illustrative of some of the logistics, conditions, timing, and process involved. However, in that case all of the work was done by the parties confidentially prior to announcing an agreement with BOD support (twice).

The CHR BOD may already know what their response will be to the unsolicited conditional offer. However, they must exercise due diligence in order to protect themselves from shareholder challenge.

Due diligence = CHR will have to hire external advisors to review the offer and make recommendations. Given the unsolicited nature of the offer, that will take some time.

[AA123455]

So what kind of timeline are we looking at here?

Days or weeks, not months.

CHR may simply announce that no agreement was reached (offer rejected or withdrawn).

There may be a period where CHR does due diligence on the offer presented. There may be a period of negotiation that results in a modified offer with BOD support.

The AC/TRZ transaction is illustrative of some of the logistics, conditions, timing, and process involved. However, in that case all of the work was done by the parties confidentially prior to announcing an agreement with BOD support (twice).

The CHR BOD may already know what their response will be to the unsolicited conditional offer. However, they must exercise due diligence in order to protect themselves from shareholder challenge.

Due diligence = CHR will have to hire external advisors to review the offer and make recommendations. Given the unsolicited nature of the offer, that will take some time.

CHR press release said it does not intend to announce further communication unless a deal is announced.

Unsolicited offer = hostile takeover... I’m sure CHR management is fighting for their lives to keep the vultures at bay, for everyone at CHR/Jazz I hope they succeed.

[mbav8r]

So what kind of timeline are we looking at here?

Days or weeks, not months.

CHR may simply announce that no agreement was reached (offer rejected or withdrawn).

There may be a period where CHR does due diligence on the offer presented. There may be a period of negotiation that results in a modified offer with BOD support.

The AC/TRZ transaction is illustrative of some of the logistics, conditions, timing, and process involved. However, in that case all of the work was done by the parties confidentially prior to announcing an agreement with BOD support (twice).

The CHR BOD may already know what their response will be to the unsolicited conditional offer. However, they must exercise due diligence in order to protect themselves from shareholder challenge.

Due diligence = CHR will have to hire external advisors to review the offer and make recommendations. Given the unsolicited nature of the offer, that will take some time.

CHR press release said it does not intend to announce further communication unless a deal is announced.

Unsolicited offer = hostile takeover... I’m sure CHR management is fighting for their lives to keep the vultures at bay, for everyone at CHR/Jazz I hope they succeed.

You should read up on poison pills, Chorus implemented it months ago, equals no hostel takeovers.

[AA123455]

The shareholder rights plan isn’t a guarantee of no hostile takeovers. It’s a plan in the event of hostile take over, shareholders have a right to purchase shares at a significant discount, making unwanted takeovers more expensive, not impossible.

[CPT.HarshColdReality]

Well let’s not get too carried away yet. We don’t know who it is or even if it will go through at all. If it were AC, I’d be happy if the lists were to remain separate though. I chose to stay at Jazz and have no desire to “fly the big planes” someday.

you dont have too. if there is one list then you can just bid on a dash or rj. the advantages here outweigh anything else. Opportunity to negotiate a better contract list wide.

[47north]

Well let’s not get too carried away yet. We don’t know who it is or even if it will go through at all. If it were AC, I’d be happy if the lists were to remain separate though. I chose to stay at Jazz and have no desire to “fly the big planes” someday.

you dont have too. if there is one list then you can just bid on a dash or rj. the advantages here outweigh anything else. Opportunity to negotiate a better contract list wide.

Except for the $, the Jazz contract is superior in many ways.

[spinaxis]

Well let’s not get too carried away yet. We don’t know who it is or even if it will go through at all. If it were AC, I’d be happy if the lists were to remain separate though. I chose to stay at Jazz and have no desire to “fly the big planes” someday.

you dont have too. if there is one list then you can just bid on a dash or rj. the advantages here outweigh anything else. Opportunity to negotiate a better contract list wide.

Except for the $, the Jazz contract is superior in many ways.

Shhhh... All the old AC farts will get mad if you mention that


I completely agree. Everything is better.

[airway]

Unsolicited offer = hostile takeover... I’m sure CHR management is fighting for their lives to keep the vultures at bay, for everyone at CHR/Jazz I hope they succeed.

Not necessarily. What if they were offering $8 a share?

[spinaxis]

Unsolicited offer = hostile takeover... I’m sure CHR management is fighting for their lives to keep the vultures at bay, for everyone at CHR/Jazz I hope they succeed.

Not necessarily. What if they were offering $8 a share?

1.3 billion valuation? I find it extremely hard to see anyone willing to pay that much for Chorus in this current climate.

[speedah]

I doubt they will pay a 300%+ premium on the closing price prior to the announcement on friday...

Unsolicited offer = hostile takeover... I’m sure CHR management is fighting for their lives to keep the vultures at bay, for everyone at CHR/Jazz I hope they succeed.

Not necessarily. What if they were offering $8 a share?

[rudder]

I doubt they will pay a 300%+ premium on the closing price prior to the announcement on Friday.....

Thus far, the market is pricing in a 30% increase over the prior 50 day average closing price.

[spinaxis]

That means nothing.

[rudder]

That means nothing.

That is the market placing a bet. Nothing more. Nothing less.

I could give you a long dissertation on valuation based on net present value of future earnings adjusted for risk but clearly there is no certainty on earnings in this environment, irrespective of the AC CPA, the leasing division, Voyageur, or the MRO division.

Something is worth what somebody else is willing to pay for it.

[truedude]

Unsolicited offer = hostile takeover... I’m sure CHR management is fighting for their lives to keep the vultures at bay, for everyone at CHR/Jazz I hope they succeed.

Not necessarily. What if they were offering $8 a share?

1.3 billion valuation? I find it extremely hard to see anyone willing to pay that much for Chorus in this current climate.

It is worth about $8 a share. The market is depressed, and everyone that watches Chorus has a valuation between $4 and $6. If someone is trying to buy it out, they would have to convince all the shareholders that their offer is superior to just waiting for the market to return. Personally, I would not sell at anything under $6.

[fish4life]

Not necessarily. What if they were offering $8 a share?

1.3 billion valuation? I find it extremely hard to see anyone willing to pay that much for Chorus in this current climate.

It is worth about $8 a share. The market is depressed, and everyone that watches Chorus has a valuation between $4 and $6. If someone is trying to buy it out, they would have to convince all the shareholders that their offer is superior to just waiting for the market to return. Personally, I would not sell at anything under $6.

It’s not worth $8/share, that was the pre-pandemic value before there was a big risk of CPA renegotiation with less favourable terms. Right now I can buy Chorus stock for a little over $3/ share from someone willing to sell it for that price which is how much the stock is worth.

YOUR perceived value of a stock is much different than what a stock is actually worth.

[truedude]

1.3 billion valuation? I find it extremely hard to see anyone willing to pay that much for Chorus in this current climate.

It is worth about $8 a share. The market is depressed, and everyone that watches Chorus has a valuation between $4 and $6. If someone is trying to buy it out, they would have to convince all the shareholders that their offer is superior to just waiting for the market to return. Personally, I would not sell at anything under $6.

It’s not worth $8/share, that was the pre-pandemic value before there was a big risk of CPA renegotiation with less favourable terms. Right now I can buy Chorus stock for a little over $3/ share from someone willing to sell it for that price which is how much the stock is worth.

YOUR perceived value of a stock is much different than what a stock is actually worth.

Yes, you can buy stock for $3. That isn't in dispute. The question is, how much stock can you buy for $3. There is a strong likely hood that the same stock is being traded again and again.

There isn't going to be a huge change in the CPA, as it is pretty much cost neutral now. The revenue from it is from the leases Chorus holds on the airplanes. That is the value. And chorus doesn't hold the lease on all the airplanes. You need to find the price in which the majority of shareholders are prepared to sell at, not the same stock that day traders continuously recycle.

[mbav8r]

It is worth about $8 a share. The market is depressed, and everyone that watches Chorus has a valuation between $4 and $6. If someone is trying to buy it out, they would have to convince all the shareholders that their offer is superior to just waiting for the market to return. Personally, I would not sell at anything under $6.

It’s not worth $8/share, that was the pre-pandemic value before there was a big risk of CPA renegotiation with less favourable terms. Right now I can buy Chorus stock for a little over $3/ share from someone willing to sell it for that price which is how much the stock is worth.

YOUR perceived value of a stock is much different than what a stock is actually worth.

Yes, you can buy stock for $3. That isn't in dispute. The question is, how much stock can you buy for $3. There is a strong likely hood that the same stock is being traded again and again.

There isn't going to be a huge change in the CPA, as it is pretty much cost neutral now. The revenue from it is from the leases Chorus holds on the airplanes. That is the value. And chorus doesn't hold the lease on all the airplanes. You need to find the price in which the majority of shareholders are prepared to sell at, not the same stock that day traders continuously recycle.

Yep, I’m hanging on to my shares for a return to 7ish, would consider 6 but for certain less than that I’ll ride them to 0

[fish4life]

Air Canada may get to a point where they stop paying chorus for a few months and then go through CCAA at which point Chorus will most likely not get paid for those months and the CPA could be up for renegotiation as a reduced rate with much less aircraft. That is one risk being priced into the stock thus reducing its value.