- AerCap's (AER +6.4%) gains today put the stock more than 40% higher since the deal with AIG was announced yesterday, and Deutsche's Michael Linenberg says there's more to come, reiterating his Buy rating and boosting the price target to $40 from $27.
- "We expect the deal to be accretive for AER shareholders on the onset, in light of the $600M of expected annual synergies and the attractive price at which the portfolio will be acquired,"says Linenberg. "Moreover, AerCap is inheriting ILFC’s order book of 385 in-demand aircraft, which should lead to a strong/relatively predictable stream of CF/EPS for the foreseeable future."
- For AIG, the deal - at the moment - is less sale than a swap, as the insurer will be an owner of 46% of AER's common stock and will still include ILFC's operating results on its own books.
- Writing in Barron's, Dimitra Defotis, says the spotlight now turns to AIG's core financial operations, and that may not be a good thing based on last quarter's results. Yes, AIG trades at a discount to book, but with analysts not projecting earnings growth next year, that discount could be warranted.
- Maybe the most bullish case for AIG at the moment is the moonshot in AerCap may allow the insurer to unload its stake at a sweet price (the lockup agreements aren't yet known).
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