Air Canada is in exclusive negotiations to acquire the company that owns Air Transat, both companies claim.
The proposed deal will assess Tranat at $ 13 per share, a 22% premium from $ 10.58 per share, which the company estimated on Wednesday. At $ 13, Transat is estimated at $ 520 million.
Shares in Transatte a. Inc., the corporate entity owned by Air Transat, paused for a moment in the news, but at the start of trading they jumped 16% to more than $ 12. This is below the level Air Canada offers, which can be a sign investors are not convinced that it is making a deal.
Earlier this month, Transat announced that Montreal-based announced that it was contacted by more than one party on a possible sale of the company. The speculation at the time was that another Canadian airline, or Air Canada or West Gators, would make the most sense as a suitor.
"Integration with Tranat represents a great opportunity for the stakeholders of both companies," said Airline Chief Executive Officer Kalin Rubinescu.
"This includes the shareholders of both Transat and Air Canada, the employees of the two companies, who will benefit from increased security and confidence in potential Canadian customers who will benefit from the enhanced ability of the merged company to participate as a highly competitive travel market leader in the world."
Transat's CEO, Anne-Marc Iostache, also dealt with the benefits.
"This announcement is good news for Transat," he said in a statement. "This is an opportunity to connect with a great company that knows and understands our industry, and has had unquestionable success in the travel business, and this represents the best chance not only for maintenance but also for the long term growth of the business and the transat work has been developing in Quebec and elsewhere for more than 30 years "He said.
Air Canada has about 36,000 employees, about 10,000 of which are based in Quebec. Transat, meanwhile, has about 5,000 employees, mainly in Quebec.
While both sides seem to favor, the deal is far from over.
Tranat said at the beginning of the month that more than one interested party turned to him for takeover, technically all Thursday's news means he agreed to exclusive negotiations with Air Canada for 30 days. If a deal is not reunited by then, or the airline will not like the conditions on the table, you can start talking to other suitors.
The exclusivity agreement also stipulates that if Transat withdraws from the transaction for a better offer, it will pay Air Canada a transfer fee of $ 15 million. If the agreement is terminated due to non-compliance with government regulations or approvals, Air Canada will pay Transat a $ 40 million commission.
These regulatory approvals are not safe.
More Buzz Aviation
According to the company's reports, Air Transat accounts for about 20% of the market for flights between Canada and Europe, and about 22% of flights between Canada and destinations such as Mexico, Jamaica, the Caribbean and Central America.
Giving the biggest player, Air Canada, to overeat an even larger chunk of these markets will certainly attract Canada's attention to the Bureau Competition – its mandate is to ensure a takeover not to stifle the market for consumers.
The shareholders of both companies must also approve each transaction. The largest shareholder of Transt is the investment company Latco Brosau & Co., which holds 6.5 million shares, or about a sixth of the company. Request for a comment if they will support any sale of the company was not immediately returned.
It is unclear how much Transat A.T. Inc., the company that owns Air Transat, is in the long-term plans of Air Canada. Transat. Inc. also owns other properties, including a travel agency, and is in the process of building 5,000 hotel rooms in the Caribbean destinations where it flies.
It is still not known whether Air Canada wants only the airline and the fleet of aircraft and stable workers, or who has an interest in ownership of assets associated with other long-term travel. But one line edition suggests that these hotels are not long-term plans for Air Canada.
"Transat has agreed to limit its commitments and expenses regarding the implementation of its hotel strategy during the exclusivity period," said Transat.
According to Tim James, a Toronto-Dominion bank analyst, the inclusion of this line "offers, not surprisingly, that Iyer Canada will not continue with the Tranceat investment initiative."
Although the travel agency business certainly supports Air Canada's package business, Air Canada and Actions, Colin Ciechaniansky, chief market strategist at SIA Wealth Management, said if the deal worked, he would not be surprised if Air Canada was forced Sell in certain parts of the non-core airline business related to, to provide regulatory requirements.
"I would expect things to go through regulatory audit regulators may require some sales," he said in an interview.
The exclusive trading session also follows weekly news that Air Canada's biggest rival, WestGen, agreed to be sold by private equity firm Onex, in a hesitant deal that made Calgary a $ 5 billion airline.
After this move, the timing of Transat's news Thursday is no coincidence, Cieszynski said.
"It's a domino effect," he said.
"The acquisition of the Unix of Westgate provoked Transat, if they were looking at other suitors, [and] Some other suitors may have decided to be more serious. "
More potential buyers can still go out. It is worth noting that as of the end of January, Transat had $ 620 million worth of cash on its books – more than $ 520 million that Air Canada offers, so there is room for a higher or better bid.
Analyst analyst Walter Sperklin, a RBC analyst, says the deal gives Air Canada a great deal of sense, as it will be able to get a competitor, boost its travel package business and acquire the company's fleet of aircraft. A time when he needed them because of the latest Boeing 737 Max grounding.
"From the price paid, the counter is at the top end, reflecting the takeoff premium, although justified by the above strategic advantages," Spracklin said in a note to customers.