ACE Aviation Holdings Poised to Buy Remaining Air Canada Shares

Shares in Air Canada (AIDIF.PK) were trading sharply higher on Thursday, as investors reacted to the news that a possible bid for all outstanding stock from controlling shareholder ACE Aviation Holdings Inc. (ACEAF.PK) is forthcoming.

ACE Aviation Holdings Inc. is poised to buy back the 25% stake it sold in a public offering two years ago, according to analyst Jacques Kavafian of Toronto-based Research Capital.

ACE has stated its intentions to dissolve itself by the end of the year, and according Mr. Kavafian, an offer for all outstanding Air Canada shares is the only viable option remaining for ACE.

"We believe the only realistic option available to it is buying back Air Canada shares," Mr. Kavafian, who recommended a 'buy' on the stock, said in note to clients.

It could theoretically sell its 75 million shares that it owns in the market.

However, Mr. Kavafian said:

With the current outlook for airline shares and volatile crude oil price environment, this strategy may not be feasible.

The prospect that ACE is considering an imminent move was bolstered with the resignation of Brian Dunne from Air Canada's board earlier this week.

The departure of Mr. Dunne, the chief financial officer for ACE, removed a conflict of interest in any deal for the airliner.

Under the proposed buyback deal outlined by Mr. Kavafian, ACE would offer as much as C$8.50 a share for the outstanding stock, which "would be difficult for any shareholder to resist."

Air Canada shares were up 19% to C$5.04 on Thursday, at 11 AM ET.