Transat shareholders approve sale to Air Canada by wide margin, despite late offer

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This article was published 15/12/2020 (2131 days ago), so information in it may no longer be current.

MONTREAL – Transat AT Inc.’s shareholders overwhelmingly approved a revised purchase offer from Air Canada despite the disclosure of a late and higher-priced competing bid.

The Montreal-based tour operator said that 91 per cent of shareholder votes were in favour of Air Canada’s bid of $5 per share, which was recommended by Transat’s leadership.

“We are pleased with the shareholder support for this revised arrangement that will create a Montreal-based global leisure leader with the scope necessary to overcome the current turbulence in the industry and to thrive beyond,” said Jean-Marc Eustache, president and chief executive officer of Transat, in a statement.

Transat disclosed in a press release before the shareholder meeting that in late November it received an unsolicited offer from a private investor outside the air transport and travel industry.

The unidentified investor was allowed to conduct due diligence with full access to the company’s financials, Transat said. Ultimately, however, Transat’s board concluded that the new offer was not better than Air Canada’s despite being at a higher price.

On a call with reporters, Eustache said price was only one factor among many that the company considered in evaluating offers.

Jean-Yves Leblanc, who chairs the special committee that evaluated the offer, said the fact that the investor was outside the travel industry, which would have led to less regulatory scrutiny, was another factor the board considered when examining the proposal.

The deal with Air Canada is expected to close in early 2021 following regulatory approval.

Patrick McQuilken, a spokesman for the Fonds de solidarité FTQ, one of Transat’s largest shareholders, called the Air Canada deal “imperfect,” but said his organization voted to approve it anyway.

“In making its decision, the Fonds took into consideration several factors, including the future of Transat’s head office and jobs in Quebec, as well as our shareholder-savers’ interest,” McQuilken said.

He added that the fund would not comment on other offers that were not presented to Transat shareholders.

Desjardins analyst Benoit Poirier said in a memo that news of the alternative offer is positive for Transat, as it could provide some support for the company’s shares if the Air Canada purchase is not approved by regulators.

Eustache told reporters that the company would be able to continue on its own if the deal wasn’t approved, but said that it would need financing and that it risked becoming even smaller as larger carriers gain market share.

Transat had been preparing for an uncertain future, taking steps this year to preserve cash amid a huge decline in revenue.

Transat reported last week that it lost $238.1 million attributable to shareholders in the fourth quarter. That brought its losses for the year to $496.5 million on 96-per-cent drop in revenues to $1.3 billion.

In October, Air Canada’s offer price was brought down to $5 from $18, reflecting the new market reality for travel-related industries since the start of the pandemic.

“It must be said that the world has changed” since Air Canada made its initial buyout proposal last year, Eustache said.

Transat’s shares were up 83 cents, or 15.69 per cent, at $6.12 in afternoon trading on the Toronto Stock Exchange.

This report by The Canadian Press was first published Dec. 15, 2020.

Companies in this story: (TSX:TRZ; TSX:AC)