Blackstone, Canadian pensions buy 25% Air Canada Aeroplan stake for C$2.5 billion
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Blackstone Inc. and three Canadian pension funds are buying a 25% stake in Air Canada's Aeroplan loyalty program for C$2.5 billion ($1.8 billion), the airline said Tuesday. The deal values Aeroplan at C$10 billion, about C$2.4 billion above Air Canada's market capitalization. Air Canada shares rose 6% to their highest since 2021, even as the carrier lowered full-year earnings guidance on surging jet-fuel prices.
Deal Structure
Blackstone, Caisse de Depot et Placement du Quebec, PSP Investments and British Columbia Investment Management Corp. agreed to acquire a 25% stake in Aeroplan for C$2.5 billion ($1.8 billion), according to Fortune. AeroTime reported the US dollar value as $1.7 billion on the same C$2.5 billion price. The transaction implies a C$10 billion valuation for Aeroplan, about C$2.4 billion above Air Canada's equity market value. Air Canada retains control of Aeroplan and holds a repurchase right for the stake between the fifth and eighth anniversaries of closing. The investor group's return is capped at a 6.5% internal rate of return.
Market Reaction and Analyst Views
Air Canada shares climbed about 6% on Tuesday to their highest level since 2021 after Bloomberg first reported the deal. Stifel analyst Daryl Young said Air Canada made 'few, if any, major concessions' and called the structure 'a pretty eloquent structure at first blush.' National Bank of Canada analyst Cameron Doerksen wrote that the implied valuation was 'well ahead of our expectations.' Aeroplan has more than 10 million members and revenue relationships with American Express, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce.
Proceeds and Earnings Outlook
Air Canada will use proceeds to meet a $1.2 billion bond maturity and fund share buybacks. The airline also lowered its full-year adjusted Ebitda guidance to C$2.9 billion to C$3.2 billion, down from C$3.35 billion to C$3.75 billion earlier in the year, citing surging jet fuel prices. It had suspended the earlier guidance in April after war broke out in the Middle East. Adjusted Ebitda excludes interest, tax, depreciation, amortization and impairment.
What's Next
Air Canada faces an upcoming C$1.2 billion bond maturity, which the Aeroplan proceeds are intended to cover. It remains unclear whether the deal will close before that deadline or whether the airline will hold its revised adjusted Ebitda range amid volatile fuel costs.
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Blackstone, Canadian pensions buy 25% Air Canada Aeroplan stake for C$2.5 billion
