Air Canada and Transat A.T. Inc. have announced a deal valued at $520 million that should see Air Canada buy Transat A.T. Inc., however some of Transat’s biggest shareholders have indicated they’re not happy with the $13 per share offer.

 

Arrangement Agreement

News broke early on June 27, 2019 that the two companies concluded a definitive Arrangement Agreement that provides for Air Canada’s acquisition of all issued and outstanding shares of Transat and its combination with Air Canada. This binding agreement has been unanimously approved by Transat’s Board of Directors.

 

 

What will happen to Transat?

Rovinescu also noted that Air Canada intends to preserve the Transat and Air Transat brands and maintain the Transat head office and its key functions in Montreal. While the deal got unanimous approval by Transat’s board, some of the company’s major shareholders remain dissatisfied with the price.

Letko, Brosseau and Associates and PenderFund Capital Management, which jointly own a 21.1% stake, have said they would vote against the agreement if the purchase price remained at $13 per share.

The agreement requires approval from two-thirds of Transat shareholders to go through. Quebec’s Fonds de solidarite FTQ, Franklin Templeton Investments, and the Caisse (Quebec’s pension fund manager) are also among the top five investors, collectively holding a 26.18% stake.

Air Canada and Transat’s combined 60% hold on the transatlantic market from Canada will also prompt an assessment from Canada’s Competition Bureau.

 

 

A long time coming

On May 15, Air Canada and Transat entered negotiations toward a possible deal, giving them 30 days to finalize the details. In early June, Quebec-based real estate developer Groupe Mach announced that it too had entered a bid for Transat for $14 per share, which was turned down.

The Air Canada deal includes a break fee of $15 million payable by Transat if it accepts a superior proposal. Air Canada must pay a reverse break fee of up to $40 million if the deal is cancelled because regulatory or governmental approvals are not obtained, subject to certain conditions.

If regulatory and shareholder approvals are obtained, the transaction is expected to be completed in early 2020.

 

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