Tuesday, July 10, 2012

Is AerCap Holdings On The Auction Block?

News came out from Flightglobal today that AerCap Holdings (AER) has placed itself on the auction block. With the stock floundering in the $10-12 range for the last few years, it wouldn't surprise me if big investors would be willing to walk away with a sizable premium.

AerCap is the world`s leading independent aircraft leasing company and has one of the youngest fleets in the industry. AerCap has a portfolio of 350 aircraft with a focus on fuel-efficient narrowbodies and widebodies. AerCap is a New York Stock Exchange-listed company (AER) headquartered in The Netherlands with offices in Ireland, the United States, China, Singapore, and the United Arab Emirates.

The stock is currently trading up 15% so clearly enough people believe the deal is on the table. Or at least the deal news has brought attention to the stock trading significantly below book value. Once aircraft values are marked up to current appraisal levels, the company might fetch closer to $20 then the suggested $17 value by Wells Fargo.

Don't see much interest in investors selling below book value which ever number is accurate. Naturally investors would like to make some quick cash from these levels, but this company is a cash machine so selling below book value wouldn't be acceptable.

As an example, leading competitor AirLease (AL) trades at 0.87 to book value while AerCap traded at only 0.67. The discount isn't warranted.

Whether a deal happens is unknown. The key remains that investors can buy into the this stock considerably below book value. The company is in the middle of a $130M stock buyback that will further increase book value per share.


Disclosure: Long AER per positions below. Please review the disclaimer page for more details.



Stone Fox Capital holds an allocation of 4.8% in $AER in his Opportunistic Arbitrage Long Only Investment Model
Stone Fox Capital holds an allocation of 9.4% in $AER in his Opportunistic Arbitrage Investment Model



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