Air Canada ups purchase price in Transat bid, securing largest shareholder’s support

Marco Green
August 13, 2019

Canada's largest airline and Transat, a budget airline and tour operator also headquartered in Montreal, announced Sunday that Transat's board unanimously supports Air Canada's new bid of $18 per share, a 38 per cent increase from its original offer of $13 per share or $520 million.

Air Canada will, therefore, be able to count on the support of Transat's largest shareholder at the shareholders' meeting scheduled for August 23.

Transat's stock price jumped 42 per cent to $16.75 on Monday.

The investor previously said it would not support the deal if the purchase price remained at $13 per share.

Transat A.T. Inc. says a Quebec securities tribunal has cease traded an offer made by Groupe Mach Acquisition Inc. for 6.9 million class B voting shares of the travel company.

The tribunal ruling, which says the bid "constitutes an abusive offer contrary to the public interest", means the Montreal-based company can not acquire any shares under its scheme and must return to shareholders any stocks already deposited.

The company is also forbidden from using any proxies associated with shares deposited under the plan.

Transat's board has recommended that its shareholders approve the deal with Air Canada, which is expected to be completed early next year, the companies said. Air Canada's break fee is also $40 million. Letko Brosseau didn't support the initial bid, but signed a lock-up and support agreement under the new terms.

Air Canada initially had offered $13 a share, a figure some in the industry thought was too low. There was no other offer.

Air Canada has enough cash on hand to cover the extra $200 million.

Chiara said he has received calls from interested parties about making a rival joint bid - "but I'm not sure we're ready to go there".

Mach disagrees with the tribunal's decision but will follow the orders, executive vice president Alfred Buggé said in an interview Monday.

Transat would now have to pay $40 million if the Air Canada transaction was terminated under certain circumstances, including the acceptance of a so-called "superior proposal".

Air Canada's odds of winning shareholder approval to buy Transat A.T. Inc. just got a whole lot better.

"The deal is still not a foregone conclusion", he added. "For shareholders of Transat and Air Canada, the combination delivers excellent value, while also providing increased job security for both companies' employees through greater growth prospects". Air Canada agreed to maintain the Air Transat and Transat brands, as well as Transat's Montreal head office and key functions.

PenderFund Capital holds about 3% of shares in Transat, according to Pandya and Refinitiv data, exceeded by only three other shareholders.

"If there's anything to take from all this it's that thank God Mach was there because we're the one that extracted the $18 price today", Buggé said.

Jean-Marc Eustache, President and Chief Executive Officer of Transat, had this to say: "We are very pleased by the added stability brought about by Air Canada's increased bid as supported by Transat's largest shareholder, Letko Brosseau".

The new deal beats an earlier offer by Montreal real estate developer Mach.

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Other reports by Click Lancashire

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