Air Canada in talks to purchase Air Transat for $488 million

Marco Green
May 18, 2019

Transat AT Inc.is in exclusive talks with Air Canada, which is offering $13 per share to buy the travel company.

Canada's largest air carrier is proposing to acquire Montreal-based Transat for $13 per share, a premium of almost 23 per cent to Wednesday's close of $10.58 on the Toronto Stock Exchange.

The potential deal, which would need shareholder and government approval, is worth $520 million.

- This winning combination will support jobs and economic development, open up the world and better position Quebec and Canada as a world leader in air travel, tourism, aviation and innovation.

Transat first disclosed that it had held preliminary talks regarding the possible sale of the company last month, but did not name the potential bidders at that time.

Transat chief executive Jean-Marc Eustache, who is one of the company's founders, said Thursday that an Air Canada deal represents the best prospect for maintaining or growing the number of jobs Transat has in Quebec and elsewhere.

Transat, which employs 5,000 people, offers vacation packages, hotel stays and air travel under the Transat and Air Transat brands in more than 25 countries. It operates most out of its hubs in Toronto, Montreal, Calgary and Vancouver to destinations in North and South America, Asia, Australia and Europe.

"This announcement is good news for Transat", he said in a release.

- Air Canada's Quebec roots and presence throughout Canada make Air Canada the ideal partner to oversee the combination of Transat employees. Transat, meanwhile, has about 5,000 employees, mostly in Quebec.

While both sides seem to be in favour, the deal is far from done. Air Canada's Executive Committee members (President and Chief Executive Officer, Chief Financial Officer, Chief Commercial Officer and Executive Vice-President, Operations) in addition to many other key members of the Executive Management team are all based in the Montreal headquarters. That deal is expected to go through by the end of 2019 or the beginning of 2020.

CityNews compared Air Canada Rouge - the airline's budget option - to it's main competitor, Air Transat, based on current prices and other factors that affect the passenger experience.

Those regulatory approvals are no sure thing. If Air Canada is successful to acquire Air Transat it will solidify Air Canada's portfolio of business including the tour operator which is something air Canada maybe has not as well as Air Transat.

It's not clear how much of Transat A.T. Inc., the company that owns Air Transat, is in Air Canada's long-term plans.

Two of Canada's best-known airlines are planing to merge. Already, Air Canada must lease some aircraft to cover routes until the 737 MAX is ready to fly again. In terms of fleet, Air Transat's fleet will easily be absorbed into Air Canada's. After being solicited by several parties and having considered available alternatives, the Board of Directors has determined that it is now in the interests of Transat and its stakeholders to finalize negotiations on an exclusive basis with Air Canada with a view to completing the transaction. In the release, Air Canada indicated their wish to grow in Montreal.

Other reports by Click Lancashire

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