Air Canada finalizes $800M share buyback plan

Air Canada has finalized the terms of a previously announced plan to buy back up to $800 million worth of its shares for cancellation.

In a press release, the airline said the substantial issuer bid will allow shareholders to tender all or a portion of their shares at prices ranging from $29 to $33 per share, in increments of 10 cents.

The offer is expected to begin Aug. 20 and expire at 11:59 p.m. ET on Sept. 24, unless Air Canada extends, changes or withdraws it.

At the lowest purchase price of $29 per share, Air Canada could buy back up to 27,586,206 shares, representing approximately 9.8 per cent of its 280,167,997 issued and outstanding shares.

Depending on the final purchase price, the offer would result in Air Canada buying back approximately 8.7 to 9.8 per cent of its outstanding shares. All shares purchased through the program will be cancelled.

How the offer works

The buyback will be conducted through what is known as a “modified Dutch auction.”

Shareholders who choose to participate can either specify a price between $29 and $33 at which they are willing to sell their shares, or submit a “purchase price tender,” agreeing to sell at whatever final price is determined through the auction.

Once the offer expires, Air Canada will determine the lowest price that allows it to purchase the maximum number of shares without spending more than $800 million.

Shareholders who tender at or below the final purchase price will receive that price for shares purchased by Air Canada.

If more than $800 million worth of eligible shares are tendered, purchases will generally be made on a pro rata basis. Shareholders holding fewer than 100 shares will not be subject to that proration.

Investors who do not participate, or whose shares are not purchased, will see their proportional ownership stake in Air Canada increase as a result of the reduction in outstanding shares.

Aeroplan investment to help fund buyback

Air Canada said the offer gives it an opportunity to repurchase shares at what it considers “currently attractive valuations” while continuing to prioritize growth investments and balance sheet strength.

The airline will fund purchases in part using proceeds from its recently announced minority equity investment in Aeroplan by funds managed by Blackstone and La Caisse, alongside other Canadian institutions. Air Canada said those proceeds have now been received in full.

Air Canada expects to send the formal offer documents to shareholders on Aug. 20.

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