Air Canada boosts Transat bid, winning largest shareholder's support

Air Transat

Air Canada is improving its offer for Quebec tour operator Transat A.T. Inc., increasing its purchase price from $13 to $18 per share winning the support of the company's largest shareholder.

Letko Brosseau, Transat's largest shareholder with about 19.3 per cent of the company's shares, supports the Air Canada acquisition, according to the statement, which added that Air Canada has entered into a lockup and support agreement with the shareholder.

Shareholders are scheduled to vote on the Air Canada proposal on August 23.

Groupe Mach submitted a rival bid on a large block of shares of Transat, in an attempt to derail its sale to Air Canada.

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.

Air Canada has all but guaranteed its purchase of Air Transat.

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

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Air Transat pilots, represented by the Air Line Pilots Association, said Friday - before the new offer emerged - that they support the Air Canada acquisition, citing "greater labour protections and job security".


"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.

Transat shares soared by as much as 40 percent during morning trading.

Following a six-month process, Transat and Air Canada announced June 27 they had reached a definitive agreement on an all-cash transaction that valued the tour and airline operator at $520 million, or $13 a share.

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. We know this achieves the best possible outcome for all stakeholders.

Transat is required to pay C$40 million if it backs out of the agreement, an increase from the earlier breakup fee of C$15 million, the statement added. "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", added Mr. Rovinescu. "We look forward to joining forces with a proven and successful player in our highly competitive and complex industry" said Jean-Marc Eustache, President and Chief Executive Officer of Transat.

"Regulatory hurdles for this transaction should not be considered a foregone conclusion", Doug Taylor, an analyst with Canaccord Genuity in Toronto, said Monday in a note to clients.

While the deal seems all but certain to be approved by Transat, Canadian regulators could still seek changes to the deal to guarantee competitiveness for consumers.

Air Canada and Transat command a combined 60 per cent slice of the transatlantic market from Canada, overlap on some sun destinations and maintain a firm hold on Montreal air travel. "However, assuming only minor concessions on Air Canada's part, we think the transaction is a strong strategic fit with significant synergy potential".

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