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Why Aircastle Limited Stock Just Popped 16.5%

By Rich Smith - Nov 6, 2019 at 2:34PM

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It's a buyout! And Aircastle shareholders can expect a big cash haul.

What happened

Aircastle Limited ( AYR ) is for sale -- and that news drove up shares of jet airplane lessor Aircastle stock 16.5% today (as of 2:10 p.m. EST).

In fact, Aircastle is more than just "for sale" -- it's practically sold already, with the company announcing today that it has "entered into a definitive agreement to be acquired by a newly formed entity controlled by affiliates of Marubeni Corporation...and Mizuho Leasing Company, Limited."

Several businesspeople hauling back on a rope to pull an arrow up.

Image source: Getty Images.

So what

In a deal valued at $7.4 billion including equity ($2.4 billion) and assumed debt ($5.5 billion) minus cash on hand ($500 million), Aircastle plans to sell itself to the acquirers, with Aircastle shareholders receiving $32 per share, cash, in return.

Shareholder derivative lawsuit firms are already swarming with lawsuits claiming the price is too low, but Aircastle management notes that the buyout price "represents a 34% premium over Aircastle's closing stock price on October 23, 2019, the last trading day prior to Aircastle's public announcement that Aircastle was evaluating strategic alternatives" -- which seems to me a fair price for a stock selling for about 12 times earnings and with no growth expected on average over the next five years. 

Now what

In further evidence of the deal price's fairness, investors applauded the news and bid Aircastle shares up today -- but not beyond the reported buyout price, suggesting there's little sentiment out there that someone else might step in and try to offer a higher price than Marubeni and Mizuho have already offered. Assuming no other offers are received and "subject to customary closing conditions," this deal should close -- and shareholders should get their money -- sometime in the first half of next year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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