Published: Tue, August 13, 2019
Markets | By Otis Pena

Air Canada's sweetened bid for Transat a fair offer: shareholder

Air Canada's sweetened bid for Transat a fair offer: shareholder

Quebec's securities tribunal has barred a developer's offer to buy up Transat shares, halting Group Mach's bid to block the tour operator's sale to Air Canada - and leaving the country's largest airline as the only player publicly vying for the company.

Now Air Canada has announced that it has agreed to increase the purchase price for the acquisition of all issued and outstanding shares of Transat, from $13 to $18 per share, making the acquisition a $720 million deal, up from the original $520 million announced in May.

Under the terms of the Lock-up and Support Agreement, Letko Brosseau has agreed to support and vote all of the Class B voting shares of Transat it controls at the August 23 Special Meeting of Shareholders of Transat in favour of Air Canada's acquisition of Transat.

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

The new $18 a share offer from Air Canada is significantly higher than Groupe Mach's suggested price and will no doubt be extremely attractive to Transat. Air Canada's break fee is also $40 million.

Toronto-based Letko Brosseau and Associates owns 19 percent of Transat.

"Given the substantially higher bid by Air Canada and the decision of the Tribunal, the noise surrounding Group Mach's proposal has all but disappeared", Nazir added.

Air Canada revised its offer following an effort by a Quebec-based real estate firm to thwart the acquisition.

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"We view the take-out price is rather generous given Transat's volatile profitability profile", said analyst Mona Nazir of Laurentian Bank Securities in a note to investors.

Transat shares were up $4.91 at $16.70 in early trading on the Toronto Stock Exchange on Monday.

The new AC bid also topped an earlier competing offer from Group Mach for C$14 per share.

"They still need to be accountable to shareholders on why they pushed that $13-per-share offer like they pushed it", Chiara told The Canadian Press.

Air Canada and Transat would together command roughly 60 per cent of the transatlantic market from Canada if the deal goes through. We know this achieves the best possible outcome for all stakeholders.

Transat spokesman Christophe Hennebelle said Air Canada's increased offer Sunday came after meetings with the tour company's biggest shareholders, which include the Fonds de Solidarite FTQ, the Caisse pension fund manager and PenderFund Capital Management.

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 has enough cash on hand to cover the extra $200 million. "The Quebec economy will derive maximum advantage of having a Montreal-based, growth-oriented global champion in aviation, the world's most worldwide business, spurring more employment and securing Montréal's position as a leader among world aviation centres". Air Canada agreed to maintain the Air Transat and Transat brands, as well as Transat's Montreal head office and key functions. It requires approval from federal transportation and competition regulators.

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