On Monday, Stifel downgraded Air Transport Services Group (NASDAQ:ATSG) from Buy to Hold, adjusting the price target to $22.50 from the previous $25.00. This change follows the announcement that ATSG has agreed to be acquired by private equity firm Stonepeak for $22.50 per share. The transaction is an all-cash deal that places the company's value at approximately $3.1 billion.
The acquisition price represents a multiple of 5.8 times the company's projected 2024 EBITDA and 5.4 times its 2025 EBITDA, as well as roughly 1 times its book value. Stifel notes that these multiples are consistent with ATSG's historical valuation. Despite the low valuation and the company's growing EBITDA, the firm suggests there is only a slight possibility that another suitor might emerge during the go-shop period, which lasts until December 23 at the latest.
The firm further explains that the potential advantages of ATSG becoming a private company could be a factor in the lack of competitive bids. The expectation is that the acquisition deal will likely be finalized in the first half of 2025, assuming no other offers are made during the go-shop period.
Stifel's downgrade reflects the belief that while a higher bid could materialize, it is considered improbable. As a result, the firm anticipates the deal proceeding as planned and has adjusted its target price to align with the acquisition price of $22.50 per share.
In other recent news, Air Transport Services Group (ATSG) is set to be acquired by investment firm Stonepeak in a deal valued at approximately $3.1 billion, including the assumption of debt. Stonepeak has agreed to purchase shares of ATSG at $22.5 each, which represents a 29.3% premium over the company's previous closing share price.
This acquisition is a significant move within the aviation leasing industry and is expected to be completed in the first half of 2025, pending regulatory and shareholder approvals.
In terms of financial developments, ATSG reported robust growth in its second quarter of 2024 and raised its adjusted EBITDA forecast to approximately $526 million. The company has also expanded its agreement with Amazon (NASDAQ:AMZN), planning to add 10 more aircraft to their fleet by peak season.
InvestingPro Insights
Recent InvestingPro data adds context to Stifel's downgrade of Air Transport Services Group (NASDAQ:ATSG). The company's market cap stands at $1.44 billion, significantly lower than the $3.1 billion acquisition value mentioned in the article. This discrepancy suggests that the market may not be fully pricing in the acquisition deal, potentially due to uncertainty about its completion.
InvestingPro Tips highlight that ATSG has been trading near its 52-week high, with a strong return over the last month and three months. This aligns with the acquisition news and the premium offered by Stonepeak. The company's P/E ratio of 79.1 and adjusted P/E of 64.46 for the last twelve months indicate a high earnings multiple, which could explain why the acquisition at 5.8 times projected 2024 EBITDA is seen as reasonable by Stifel.
Interestingly, InvestingPro Tips also reveal that management has been aggressively buying back shares, which could have been a factor in making the company an attractive acquisition target. However, it's noted that ATSG operates with a significant debt burden, which new private ownership might address more effectively.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for ATSG, providing a deeper understanding of the company's financial position and market performance.
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