Chorus to be sold ?

[milhouse]

I don’t see it as AC. If it was AC it would not have been leaked as they would have had everything confidential until an announcement IMO. But that’s just purely speculation.

Nothing was leaked.

There was an intervention by the securities regulator about unusual trading activity. That forced CHR to disclose the unsolicited offer.

Unusual trading activity is what implies a leak.

[fish4life]

https://www.bnnbloomberg.ca/westjet-del ... -1.1512435

Any chance the WJ/Delta Joint venture and Chorus having an unsolicited offer are related?

It would be illogical to think that those companies would expect a competition bureau to be ok with that purchase.
Also I’d imagine there is “no-competition” clauses in the CPA with AC.

[rudder]

I don’t see it as AC. If it was AC it would not have been leaked as they would have had everything confidential until an announcement IMO. But that’s just purely speculation.

Nothing was leaked.

There was an intervention by the securities regulator about unusual trading activity. That forced CHR to disclose the unsolicited offer.

Unusual trading activity is what implies a leak.

No corporate executive is that stupid, or that careless, to share information externally or to act on non-public information.

More likely that the potential acquirer was taking up CHR shares. There was a 7% share price increase on the day in question prior to the ordered trading halt. Perhaps lots of buy orders placed?

A leak is a serious allegation. No doubt securities regulators will look at who was buying CHR shares that morning. But I doubt they will find evidence of a party to the non-public information acting on that information, other than the potential acquirer, which is legal.

[hithere]

AC already owns 10% of Chorus and Mr. Rousseau who currently sits on the Chorus Board of Directors and will be Rovinescu’s successor at AC when he retires in February. AC also did not try to settle the ACPA CPA scope grievance in the latest ACPA MOA and was content(it appeared) to allow it to go to arbitration. Seems to be a lot of things going on between AC and CHR for it to be anyone other than AC who is interested

[milhouse]

Nothing was leaked.

There was an intervention by the securities regulator about unusual trading activity. That forced CHR to disclose the unsolicited offer.

Unusual trading activity is what implies a leak.

No corporate executive is that stupid, or that careless, to share information externally or to act on non-public information.

There are plenty of corporate executives serving sentences for insider trading. Not saying that's the case here but insider trading is rampant, and unfortunately hard to prove.

[mbav8r]

The Company shall, in any future sale of a business or part thereof require as a condition of sale that the following be inserted into the Agreement of Sale:
a) A condition that the successor, in any proceedings before any court, board, or tribunal shall not take any position incompatible with the minimum rights and privileges set out in this section and shall make every effort to ensure such minimum rights and privileges are guaranteed.
b) That in the event of a seniority list integration pursuant to an intermingling of bargaining units following such a sale, the seniority numbers of all Pilots on the Pilot System Seniority list shall be fully integrated pursuant to ALPA Merger Policy. c) That every Pilot on the Pilot System Seniority List as of the date of sale shall be credited with seniority for all purposes with the successor

[Fanblade]

https://www.bnnbloomberg.ca/westjet-del ... -1.1512435

Any chance the WJ/Delta Joint venture and Chorus having an unsolicited offer are related?

It would be illogical to think that those companies would expect a competition bureau to be ok with that purchase.
Also I’d imagine there is “no-competition” clauses in the CPA with AC.

There is a no competition type clause in the CPA but I wasn’t talking about Jazz working for WJ or Delta. I’m thinking more along the lines of Onex looking to consolidate CPA providers under one holding company. ABC holdings would own Chorus and Encore. Both provide CPA services to their respective partners.

What would the valuation be on that holding company post pandemic?

I’m not even throwing out a guess. Just musing.

[Fanblade]

https://www.bnnbloomberg.ca/westjet-del ... -1.1512435

Any chance the WJ/Delta Joint venture and Chorus having an unsolicited offer are related?

It would be illogical to think that those companies would expect a competition bureau to be ok with that purchase.
Also I’d imagine there is “no-competition” clauses in the CPA with AC.

There is a no competition type clause in the CPA but I wasn’t talking about Jazz working for WJ or Delta. I’m thinking more along the lines of Onex looking to consolidate CPA providers under one holding company. ABC holdings would own Chorus and Encore. Both provide CPA services to their respective partners.

What would the valuation be on that holding company post pandemic?

I’m not even throwing out a guess. Just musing.

https://www.bnnbloomberg.ca/westjet-del ... -1.1512435

Any chance the WJ/Delta Joint venture and Chorus having an unsolicited offer are related?

It would be illogical to think that those companies would expect a competition bureau to be ok with that purchase.
Also I’d imagine there is “no-competition” clauses in the CPA with AC.

There is a no competition type clause in the CPA but I wasn’t talking about Jazz working for WJ or Delta. I’m thinking more along the lines of Onex looking to consolidate CPA providers under one holding company. ABC holdings would own Chorus and Encore. Both provide CPA services to their respective partners.

What would the valuation be on that holding company post pandemic?

I’m not even throwing out a guess. Just musing. I just think consolidating the regional industry under one roof has value.

More likely though it is these guys trying to consolidate more under their roof.

https://www.exchangeincomecorp.ca/

[KenoraPilot]

Onex and EIC have been making some large gains on stock lately. Onex has over 10Billion in liquid assets currently, not sure how liquid EIC is.

[rudder]

https://www.bnnbloomberg.ca/westjet-del ... -1.1512435

Any chance the WJ/Delta Joint venture and Chorus having an unsolicited offer are related?

It would be illogical to think that those companies would expect a competition bureau to be ok with that purchase.
Also I’d imagine there is “no-competition” clauses in the CPA with AC.

There is a no competition type clause in the CPA but I wasn’t talking about Jazz working for WJ or Delta. I’m thinking more along the lines of Onex looking to consolidate CPA providers under one holding company. ABC holdings would own Chorus and Encore. Both provide CPA services to their respective partners.

What would the valuation be on that holding company post pandemic?

I’m not even throwing out a guess. Just musing.

I just spent more time than I care to repeat on SEDAR looking at the CHR documents.

There is a redacted copy of the AC CPA as well as documents updating that CPA in 2015 and 2019.

The ‘change of control’ language does not allow for any acquirer that operates flights or sell tickets in/out of any of YUL/YYZ/YYC/YVR or an acquirer that controls an air operator that serves any of those hub cities.

Excerpt from the CPA:

“A prohibited Change of Control, as set forth above, shall constitute an Event of Default which shall entitle AC to terminate the CPA”.

Due to CHR BOD presence, Rousseau/AC would have known in the instant of an unsolicited offer from a third party.

[Fanblade]

It would be illogical to think that those companies would expect a competition bureau to be ok with that purchase.
Also I’d imagine there is “no-competition” clauses in the CPA with AC.

There is a no competition type clause in the CPA but I wasn’t talking about Jazz working for WJ or Delta. I’m thinking more along the lines of Onex looking to consolidate CPA providers under one holding company. ABC holdings would own Chorus and Encore. Both provide CPA services to their respective partners.

What would the valuation be on that holding company post pandemic?

I’m not even throwing out a guess. Just musing.

I just spent more time than I care to repeat on SEDAR looking at the CHR documents.

There is a redacted copy of the AC CPA as well as documents updating that CPA in 2015 and 2019.

The ‘change of control’ language does not allow for any acquirer that operates flights or sell tickets in/out of any of YUL/YYZ/YYC/YVR or an acquirer that controls an air operator that serves any of those hub cities.

Excerpt from the CPA:

“A prohibited Change of Control, as set forth above, shall constitute an Event of Default which shall entitle AC to terminate the CPA”.

Due to CHR BOD presence, Rousseau/AC would have known in the instant of an unsolicited offer from a third party.

Perhaps why the “number of significant conditions” comment? It looks like any company currently involved in aviation in Canada would be considered a prohibited change of control.

IOW words AC has the final thumb up or down. I have to conclude then that whatever this proposal is, the people making the sales pitch think AC might be interested. Otherwise it’s pointless.

[Loon-A-Tic]

So AC hands over a "gutted" Jazz minus a recently signed, crippling long term CPA agreement and SKV becomes AC sole CPA holder and regional carrier on a lower cost operating structure.

[mbav8r]

So AC hands over a "gutted" Jazz minus a recently signed, crippling long term CPA agreement and SKV becomes AC sole CPA holder and regional carrier on a lower cost operating structure.

Who, in their right mind would buy a company without a long term contract?

[rudder]

IOW words AC has the final thumb up or down. I have to conclude then that whatever this proposal is, the people making the sales pitch think AC might be interested. Otherwise it’s pointless.

AC paid $97MM for a 10% stake in CHR. Prior to the price run up on Friday, that investment was worth $24MM. It is now worth $31MM. AC is still underwater on that investment and will still be even with a third party offer to take up the AC held CHR shares at a premium over the 50 day price average.

AC cannot block a third party offer from a non-industry player. However, my guess is AC wanted a presence on the CHR BOD for a reason. If CHR is taken private, that presence will end.

There may be an auction scenario developing.

[timeflies]

AC already owns 10% of Chorus and Mr. Rousseau who currently sits on the Chorus Board of Directors and will be Rovinescu’s successor at AC when he retires in February. AC also did not try to settle the ACPA CPA scope grievance in the latest ACPA MOA and was content(it appeared) to allow it to go to arbitration. Seems to be a lot of things going on between AC and CHR for it to be anyone other than AC who is interested

what you are saying makes sense.

Air Canada buying Chorus, so the ACPA will stop making noise when the company gives more flying to Jazz because they will technically become AC pilots ?

interesting times for sure.

[Fanblade]

AC already owns 10% of Chorus and Mr. Rousseau who currently sits on the Chorus Board of Directors and will be Rovinescu’s successor at AC when he retires in February. AC also did not try to settle the ACPA CPA scope grievance in the latest ACPA MOA and was content(it appeared) to allow it to go to arbitration. Seems to be a lot of things going on between AC and CHR for it to be anyone other than AC who is interested

what you are saying makes sense.

Air Canada buying Chorus, so the ACPA will stop making noise when the company gives more flying to Jazz because they will technically become AC pilots ?

interesting times for sure.

How did this subject get turned into scope? Never ever ends.

Being owned by AC does not allow that company to operate aircraft above a specific gauge. Jazz was wholly owned by AC in the past. You must be on the AC pilot seniority list to operate above that specific gauge.

There would need to be a corporate merge. An integration of seniority lists.

[47north]

Think Endeavour, PSA, Horizon. All regionals that were taken over by the major. Makes sense for AC now too if they have the capital. Brings control in-house and reduces the cost of feed even further. A transaction is a bargain at these prices.

We seem to lag the US industry by a few years. Purchasing their feed would be just another example of aligning with the business model of other NA carriers.

[Fanblade]

Think Endeavour, PSA, Horizon. All regionals that were taken over by the major. Makes sense for AC now too if they have the capital. Brings control in-house and reduces the cost of feed even further. A transaction is a bargain at these prices.

We seem to lag the US industry by a few years. Purchasing their feed would be just another example of aligning with the business model of other NA carriers.

The press release said third party. AC owns 10% of Chorus and they have a long term working relationship.

My take on “third party” meant it was an outsider to the AC/Chorus relationship.

But who knows.

[TheStig]

I would think there are plenty of private equity firms on Bay St bargain hunting right now. I'm a pilot so I only know the names of two; ONEX, which would have to deal with anti-competitive scrutiny and Canaccord Genuity.

[Splash]

I wonder if a purchaser would have to enter into a new CPA agreement with AC. That could be in AC interest and be to their benefit.

[rudder]

I wonder if a purchaser would have to enter into a new CPA agreement with AC. That could be in AC interest and be to their benefit.

The short answer is NO.

There is change of control language in the CPA (referred to above). There is a redacted copy of the CPA on SEDAR.

AC may terminate the CPA under the change of control language only if the prohibited terms specified therein are met. There is no unilateral opportunity to reopen the CPA as a result of change in control. The parties can always consensually agree to renegotiate the terms of the CPA.

If AC is the purchaser, then it will likely void the CPA and revert to CHR (and Jazz) as a wholly owned subsidiary as it was in 2006 prior to the Jazz Air IPO. The only value to AC of maintaining a CPA with CHR (or Jazz) is to establish earnings for the subsidiary in order to spin it off (again).

If AC were to acquire CHR, there is nothing stopping it from divesting of CHR assets or non-core businesses in order to recoup a portion of or all of the acquisition expense. Same scenario applies to the TRZ acquisition.

[spinaxis]

I wonder if a purchaser would have to enter into a new CPA agreement with AC. That could be in AC interest and be to their benefit.

The short answer is NO.

There is change of control language in the CPA (referred to above). There is a redacted copy of the CPA on SEDAR.

AC may terminate the CPA under the change of control language only if the prohibited terms specified therein are met. There is no unilateral opportunity to reopen the CPA as a result of change in control. The parties can always consensually agree to renegotiate the terms of the CPA.

If AC is the purchaser, then it will likely void the CPA and revert to CHR (and Jazz) as a wholly owned subsidiary as it was in 2006 prior to the Jazz Air IPO. The only value to AC of maintaining a CPA with CHR (or Jazz) is to establish earnings for the subsidiary in order to spin it off (again).

If AC were to acquire CHR, there is nothing stopping it from divesting of CHR assets or non-core businesses in order to recoup a portion of or all of the acquisition expense. Same scenario applies to the TRZ acquisition.

Buy Chorus.. sell off Voyageur, the leasing company and all other parts that are non-Jazz. Then run Jazz for 5-10 years and rebuild. Then sell it off again.

[Gulfstream5]

I wonder if a purchaser would have to enter into a new CPA agreement with AC. That could be in AC interest and be to their benefit.

The short answer is NO.

There is change of control language in the CPA (referred to above). There is a redacted copy of the CPA on SEDAR.

AC may terminate the CPA under the change of control language only if the prohibited terms specified therein are met. There is no unilateral opportunity to reopen the CPA as a result of change in control. The parties can always consensually agree to renegotiate the terms of the CPA.

If AC is the purchaser, then it will likely void the CPA and revert to CHR (and Jazz) as a wholly owned subsidiary as it was in 2006 prior to the Jazz Air IPO. The only value to AC of maintaining a CPA with CHR (or Jazz) is to establish earnings for the subsidiary in order to spin it off (again).

If AC were to acquire CHR, there is nothing stopping it from divesting of CHR assets or non-core businesses in order to recoup a portion of or all of the acquisition expense. Same scenario applies to the TRZ acquisition.

Buy Chorus.. sell off Voyageur, the leasing company and all other parts that are non-Jazz. Then run Jazz for 5-10 years and rebuild. Then sell it off again.

This is clearly CRs retirement gig, swooping in to purchase CHR and remaining on as ACs consultant in the background giving way to cancel the 10 year pilot contract jazz has with the company to reduce costs and ultimately pave the way to axe the rest of the CPA carriers i.e. sky. Those 175s unfortunately can't even cross the Rockies and serve of no interest to AC post pandemic.

Never let a crisis go to waste.

[flyer 1492]

I would think there are plenty of private equity firms on Bay St bargain hunting right now. I'm a pilot so I only know the names of two; ONEX, which would have to deal with anti-competitive scrutiny and Canaccord Genuity.

Perhaps Fairfax?

[kiaszceski]

Onex and EIC have been making some large gains on stock lately. Onex has over 10Billion in liquid assets currently, not sure how liquid EIC is.

As of June 2020 Onex had $716M of cash and cash equivalents. However Free cash flow is only $80M

As of June 2020 EIC had $66M of cash and cash equivalent. However, Free cash flow was $-38M

I would think there are plenty of private equity firms on Bay St bargain hunting right now. I'm a pilot so I only know the names of two; ONEX, which would have to deal with anti-competitive scrutiny and Canaccord Genuity.

Perhaps Fairfax?

You seem to have some good info ... they have more than 1B of free cash flow as of June 2020, however the stock didn't move at all when CHR got halted...