Air Canada Parent Poised for IPOs, Radical Change

Aug. 15, 2006
ACE Aviation Holdings Inc. says it's planning another spinoff, a public stock offering of a minority stake in Air Canada.

ACE Aviation Holdings Inc. says it's planning another spinoff, a public stock offering of a minority stake in Air Canada, in a move that could begin the dramatic reshaping of the holding company created to clear the skies for the once-insolvent airline.

While announcing a healthy second-quarter profit for ACE yesterday, chairman and chief executive officer Robert Milton also said Air Canada's technical-services division, known as ACTS, is expected to be sold.

As a result, the holding company structure of ACE, set up in late 2004 to oversee the restructuring of Air Canada after it sought bankruptcy-court protection, couldcease to exist.

"You have heard me say many times over the last two years that we have a commitment to maximize shareholder value in ACE by surfacing the value of its subsidiaries," Milton said during a conference call with analysts.

"We have definitely got our heads past the possibility that in time there is no ACE. So there is no preconceived outcome there.

"We're really just driving it to get the best result for the shareholder," he said. "We have come to the conclusion that we do not need to own any of these companies, but that is not to say that we will (do that)."

Profit for the quarter rose 40 per cent to $236 million on one-time gains, compared with $169 million a year earlier, the Montreal-based company reported.

Milton said ACE will launch an IPO of a minority stake in Air Canada late this year.

That would make the third public offering, after ACE spun out portions of discount carrier Jazz and travel-rewards business Aeroplan.

Air Canada traded as a separate company before it sought bankruptcy-court protection.

"The IPOs of Aeroplan and Jazz in June 2005 and February 2006 were very successful," Milton said. "Both have developed well as stand-alone businesses with outside investors and have delivered strong financial results. We expect both Air Canada and ACTS to benefit in a similar way as we move ahead."

Analyst Cameron Doerksen said that there indeed might one day be no need for ACE.

"Once you've spun out Aeroplan, Jazz and sold the maintenance division, what do you have left in ACE?" asked Doerksen, who works at Versant Partners Inc.

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