Air Canada could be eyeing exit plan from Transat deal: analysts
Analysts believe Air Canada may be looking for an escape hatch to exit its proposed $720-million acquisition of Transat A.T. Inc., after coronavirus crushed the airline sector and dimmed prospects of passengers boarding planes with any frequency any time soon.
Le Journal de Montreal reported Tuesday, citing three anonymous sources, that Air Canada wants the federal government to block the purchase as it awaits a final decision from Transport Minister Marc Garneau.
Air Canada did not confirm or deny the media report.
“At this point we are awaiting the outcome of ongoing regulatory reviews and so are unable to offer a comment,” Patrick Fitzgerald, an Air Canada spokesman, wrote in an email to the Financial Post.
Transat declined to comment, but said on May 25 it expects the deal to close in the fourth quarter.
The acquisition of Montreal-based Transat, a regional carrier, was seen as a way for Air Canada to extend its domestic network and capture more flights out of regional hubs. But the environment has changed dramatically and Air Canada’s hesitancy, according to the media report, underscores the far reaching economic impacts of the coronavirus epidemic.
It would be a remarkable reversal as Air Canada spent the past year pushing for approval of the purchase, even sweetening its initial cash offer of $13, made last June, to $18 per share in August — a 38-per-cent increase. Transat’s share had been trading around $5 weeks before the deal was announced, suggesting that the final offer represented a 260-per-cent premium — considered one of the highest ever in the airline industry.
Air Canada’s share price, which hovered around $40 per share last August, rose 7.7 per cent on Wednesday to $17.99, while Transat declined 2.43 per cent to $6.42.
David Ocampo, an analyst at Cormark Securities, Inc., said he questions whether Air Canada still wants to go through with the deal.
“Right now, they’re just in cash preservation mode,” Ocampo said, adding that Air Canada has recently started moving some cargo while its passenger fleet remains idle.