Air Canada enters talks to buy Transat

  • Air Canada enters talks to buy Transat

Air Canada enters talks to buy Transat

Robert Kokomo, President of AirTrav, feels the stiff competition will likely drive Air Canada to do its best to avoid turbulence.

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 proposed deal will see Air Canada purchase all outstanding shares of Transat A.T. for $13 per share. At $13, Transat is being valued at roughly $520 million.

The exclusive dealings move also comes on the heels of news this week that Air Canada's biggest rival, WestJet, has agreed to be bought by private equity firm Onex, in a tentative deal that values the Calgary-based airline at $5 billion. In terms of fleet, Air Transat's fleet will easily be absorbed into Air Canada's.

While the travel agency business would certainly buttress Air Canada's vacation package business, Air Canada Vacations, Colin Cieszynski, chief market strategist at SIA Wealth Management, said if the deal is successful, he wouldn't be surprised if Air Canada is forced to sell off some parts of the business not related to the core airline, to satisfy regulatory requirements.

Air Canada does have the necessary funding to seal the deal.

- The combination of Transat A.T. Inc.

Moore added that Air Canada buying Transat signals a possible long-term strategy for the airline to get into the hotel business.

- 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. "This is an opportunity to team up with a great company that knows and understands our industry and has had undisputable success in the travel business". The company has said its operations will continue as normal and there will be no change for travellers.

The Board of Directors of Transat has agreed to the exclusivity agreement based on a unanimous recommendation from a special committee of independent directors that was charged with examining any proposals for the acquisition of the shares of Transat, with the assistance of financial and legal advisors, and with considering all strategic options, as was announced on April 30, 2019.

Air Transat has roughly 5,000 employees.

Transat AT in exclusive talks with Air Canada, which is offering roughly $488 million to buy the travel company.

The letter of intent states Transat would be required to pay a $15 million fee, while Air Canada would be subject to a $40 million reverse break fee, if either party backs out.

Meanwhile the union representing Air Canada and Air Transat flight attendants responded to the announcement saying if the purchase is finalized, it plans to make the new employer accountable for promises made to employees of increasesd job security. Moreover, the execution of a definitive agreement by Air Canada will be subject to the execution of support and voting agreements by certain large shareholders of Transat.