The $5 per share bid for ATAir Canada's offer for AT started at $13 per share and got bumped up to $18 per share.
Since then AT has taken on an extra $200 million of debt on their balance sheet in aircraft leases just in the last quarterly report. They now are taking on $250 million in debt with a new line of credit. That is $450 million dollars of new debt. Spread over the shares that is $13 per share of new debt on the balance sheet. Take that from $18 and you have $5 left.
$5 per share is your new $18 per share.
Now, to inform you properly this does not account for the burn rate on their free cash. When you spend less than you make you burn your FCF and your cash reserved for future use. AT is already worth less than $5 per share and is worth less every day.
Why would anyone buy it?
Airliine investor has a new post on the AC BB that explains it all. It is the airplanes...and that is all AC is offering because AT is virtually bankrupt before this $5 transaction can close in early 2021..
For AC they get their 321 neos and the personel to fly them. They also get a pile of debt to sort out and a bunch of disgruntled employees and customers. AC has been there before.
As one who got caught in the takeover of Canadian Airlines by AC decades ago the dance being played out is eerily similar. Nobody wanted to buy a bankrupt airline then. AC was the only motivated candidate because AC wanted the global routes to Asia and Australia.
In the middle of a pandemic, who in heaven's name in Canada (the buyer must be Canadian) would want to buy a bankrupt airline with no hope of making money until the middle of 2021 at the absolute earliest. With the debt load it is a Hail Mary that they will be able to make a profit at all in the Covid and post-Covid airline environment. Ask Gerry Schwartz.
There is only one buyer with the motivation to buy AT as anything but a job preservation project , and that is AC. Once again airlineinvestor lays it out over on the AC bullboard.
I suggested AT folks read it and the TD post on their own billboard and figure it out. I cannot see a way that any other deal gets done before AT is forced to close by creditors. Everyone on this BB may want to have a read of both as well.
I presented this as "reality therapy". I am not trying to disparage anyone but this is the reality.
I will close with one of the wisdoms I have learned. When you get a buyout (especially from AC), the first offer is the best offer. If you start tinkering with it, the value of the offer goes down and/or the offer tends to disappear and the following offers and choices just get worse and worse.
After how the CA/AC debacle 20 years ago played out, I hope the government continues to stay out of the way.
Been there. Done that. Don't need to see that again.