Stone Fox Capital's  Instablog

In a rather unusual twist, Genesis Lease (GLS) confirms that they are actually in M&A discussions backing up a earlier story today. No guarantee that it will work out, but it's surprising to see that the article was at least partially accurate. In the past it tends to work out that such articles are only half accurate. The article suggested that AerCap (AER) was in the process of buying GLS for a 40% premium or a price that would work out to $9.60. So don't be surprised if it's actually another acquirer or if the purchase price is materially different.

The deal would still be way below the $14 book value of GLS, but Stone Fox Capital has argued that since AER also trades at a similar BV discount it'd be advantageous for GLS shareholders to take the 40% bump and then participate in any AER rally. A rally likely to be quicker with the attention such a deal would bring. In addition, we suggested just less then a month ago that AER was the best investment in the airplane leasing sector: AirCap Leads the Airplane Leasing Sector.

Guess we'll see if the deal actually gets done. GLS is trading up 12% in after hours action. Anybody interested in how a similar deal worked out should check out the Tween Brands (TWB) takeover. Most investors suggested that TWB wasn't getting enough value in the deal with Dressbarn (DBRN). Marybe/maybe not but the stock has gone from trading at $5 before the deal to $6.75 the day off to over $8 now. And in that scenario, shareholders were more diluted with less potential for realizing the growth potential of TWB. In this case, I don't see the potential as diminished and hence would keep my stock and let it roll into AER tax free.

As usual, don't invest because of the potential deal, but rather because GLS trades below book value and has great potential with the global recovery taking shape.

Disclosure: Long AER and GLS