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Air Canada Enters Exclusive Talks To Purchase Air Transat

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Air Canada Enters Exclusive Talks To Purchase Air Transat

Air Canada Enters Exclusive Talks To Purchase Air Transat
May 16
13:18 2019

MIAMI — Air Canada announced early Thursday that it was in exclusive talks to purchase all shares of Transat A.T. and combine both companies, based out of Montreal, to create a solid leader in Canadian aviation and tourism.

The all-cash deal for Canada’s largest airline is not subject to any further financing and brings a valuation of approximately C$520 million, or C$13 per Transat share, with closing shares around the C$10.58 mark on Wednesday’s close, as well an increase to C$12.20 just after Thursday’s announcement on the Toronto Stock Exchange.

Photo: Andrew Cline

If successful, the deal for Air Canada—named one of Montreal’s top employers for each of the last six years—promises more destinations to choose from around the world and the perks of two-way, reciprocal tourism for its stakeholders.

“A combination with Transat represents a great opportunity for stakeholders of both companies,” said Calin Rovinescu, President and Chief Executive of Air Canada.

The negotiations are still subject to Air Canada’s due diligence, and regulatory approvals with final shareholder say from both sides to wrap up in the next 30 days. The potential deal is expected to have a positive stabilizing effect for some 36,000 Air Canada employees and 5,000 Air Transat employees.

Airbus A330-200, A330-243, C-GTSN, c/n 369, f/n 104, Air Transat (TS/TSC) is seen in the new livery at Toronto Lester B. Pearson International Airport • Photo: Andrew Cline

“This includes the shareholders of both Transat and Air Canada, employees of both companies, who will benefit from increased job security and growth prospects, and Canadian travelers, who will benefit from the merged company’s enhanced ability to participate as a leader in the highly competitive leisure travel market globally,” said Rovinescu.

An added incentive for the deal is Air Transat’s newly delivered Airbus A321LRs, which offers Air Canada new seat and range capacity amidst a dire situation with its grounded Boeing 737 MAX planes. The leisure carrier has 17 planes on order.

Photo: Joe G Walker

Air Transat also owns a myriad of properties, including recently bought land in Puerto Morelos, Mexico to begin building its first 5,000 room hotel complex, a national travel agency, and several other assets.

“This represents the best prospect for not only maintaining but growing over the long term the business and jobs that Transat has been developing in Quebec and elsewhere for more than 30 years,” said Jean-Marc Eustache, President and Chief Executive Officer of Transat.

Caveats embedded in the agreement is a break fee of $15 million for Transat if it accepts another offer and $40 million for Air Canada if it doesn’t live up to Canadian transportation regulatory compliance laws and policies.

Word of the deals comes as no surprise and closely on the heels of Monday’s announcement by WestJet—Air Canada’s most fervent airline opponent—that it has plans to be sold to Toronto-based private equity firm Onex for $5 billion.

Quebec politicians looking favorably upon the deal also, as Premier and former executive with Air Transat, François Legault called it a potentially made-in Québec success story.

“If Air Canada buys Transat, we’ll find ourselves in Quebec with a solid head office that will be able to continue to develop,” said Mr. Legault.

The acquisition allows Air Canada to grow its strategic hub at Montreal-Trudeau airport, where it’s added 35 new routes since 2012 serving over 10 million passengers in Quebec in 2018, and increasing its stake in passenger air travel opportunities with Transat’s 60 additional routes to the Americas and Europe with Transat’s current fleet of about 40 planes.

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Leila Chaibi

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