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Gold/Mining/Energy : Air Canada is taking off? -- Ignore unavailable to you. Want to Upgrade?

To: Jay who wrote (992)	11/9/1999 6:10:00 PM
From: zakynthos	Respond to of 1033

The present price of + - 10$ represents the 16$ for 36% of shares and the value of the remaining 64%.That means that the share price after the Nov 29 buyback is being evaluated at something like 7$/share (for an average price of roughly 10$). The liklihood in my thinking is that share price moves up subsequently although a number of factors related to the buyout or bankruptcy of Canadian will obviously impact the share price. Still, given that AC was in the seven dollar range before the Onex affair, that Canadian is clearly in an iffy situation, that there will be less shares outstanding,that AC was moving up before all this broke out, that the committment of star alliance has been tested and did not falter, this suggests to me that the shares should appreciate from then on. The down side would be a decision by AMR to refinance Canadian and perpetuate the pre onex situation. How willing they are to do that and for how long would depend on how much they benefit from the Canadian connections. I recently read somewhere that their relationship with Canadian is less important for them now that other (Japan Air I think) asian connections exist within one world alliance. As far as your Dec options go..... I would welcome comment on the above thinking in the context of a medium term ( 5-6 months) hold. I bought in at 6 and am holding.

To: Jay who wrote (992)	11/12/1999 10:16:00 AM
From: D.M.	Read Replies (1) \| Respond to of 1033

Friday, November 12, 1999 Air Canada a 'no-brainer' investment? Stephen Miles Financial Post John Lehmann, National Post Among Air Canada's assets is this Airbus A340, seen here with pilot Jim Newcombe at the controls. Is Air Canada's stock the "no-brainer buy" it appears? Simple arithmetic would suggest it is worth more than its $10 market valuation. Take an investor who bought three Air Canada shares (AC/TSE) at $10 each yesterday. Assuming all the company's shares are tendered to its bid to buy back 36.4% of those outstanding -- likely, because the bid of $16 a share is a 60% premium -- and the firm buys back the shares on a pro-rata basis, the investor would be left with the equivalent of about two shares. After receiving $16 from Air Canada for 36.4% of the "mini portfolio", the cost price of the remaining portion (63.6%) would be $14, or about $7 a share. If the average cost is $7 and the market values them at $10, isn't it a good time to buy now? Most analysts say Air Canada is a great buy -- on paper, at least. But they warn the market is seldom wrong in making valuations, factoring in intangibles such as risk. Still, a survey of 11 analysts reveals that they are decidedly bullish on Air Canada, with two "strong buy" ratings, five "buys", two "outperforms" and two "holds." Jacques Kavafian, an analyst at Yorkton Securities Inc., describes Air Canada as "a no-brainer -- a screaming buy." "We rate it as a 'strong buy' because we think after the buyback, the shares will trade at more than $13," he says. "Not only will you be getting about $5.82 cash per share from the buyback, the remaining share will be worth $13.20 over a one-year period, based on earnings that the company will generate." By reducing the shares outstanding, Air Canada would lift the valuation. "That's why the stock is going to be $13 because earnings will be up to $1.65 a share [in 2000] from 80½ a share in 1999." Mr. Kavafian says investors can enhance their return by buying the class A shares, trading at a 70½ discount to the common shares but which would be repurchased for $16. "If you buy the class A shares today, over the next 12 months you will get a value of $19 to $20." So why is the market convinced Air Canada stock is worth just $10? Mr. Kavafian says the valuation has been hampered by a misunderstanding of how Air Canada will finance the buyback. "A lot of people believe Air Canada will take on $1.1-billion of debt to execute the buyback. But they have not understood that it got $630-million of cash from its Star Alliance partners and CIBC and they are using that cash, complemented by a $300-million debt and $300-million of their own cash, to do the buyback. So they are raising their debt by $300-million, not $1.1-billion. We figure it will cost them an additional 5½ to 10½ a share in interest expense, but that is factored into the $1.65 a share [2000] earnings we are looking for."