New deal for Transat ‘good news’
Top shareholder calls Air Canada offer ‘reasonable’
The biggest shareholder in Air Canada and Transat A.T. Inc. says that Air Canada’s revised offer for the Canadian tour operator was “a very reasonable one,” given the turmoil in the aviation industry.
Peter Letko, a co- founder of investment manager Letko Brosseau, called the deal “good news” but said Tuesday the firm would wait to see if a rival bidder emerged before committing to the Air Canada offer.
On Saturday, Air Canada, Canada’s biggest airline, cut the deal value to buy Transat by nearly 75 per cent to about $188.7 million, down from $ 720 million, as COVID-19 weighs on travel demand.
Transat shares rose as much as 30 per cent on Tuesday and were up slightly on Wednesday as Air Canada’s revised offer raised optimism the deal, shaken by the COVID-19 pandemic, could be completed.
Wi th the pandemic grounding flights globally, Air Canada had faced shareholder pressure to renegotiate the deal, which is still pending approval from European and Canadian regulators.
“The price is a long way from what we agreed ... but it’s clear that the industry has gone through a period where it’s really suffered,” Letko told Reuters in a phone interview. “If nothing transpires, I think the Air Canada offer is a very reasonable one.”
Letko Brosseau owns an 8.69- per- cent stake in Air Canada and almost 15 per cent of Transat, according to Refinitiv data.
As part of the revised deal, the purchase price could be paid to Transat shareholders in cash or shares of Air Canada, which Letko called interesting.
Transat shares closed Wednesday at $ 4.86 in Toronto trading, compared with Air Canada’s revised offer price of $ 5 a share. Air Canada finished the day down 0.13 per cent.
Analysts said the revised price would give Air Canada greater motivation to conclude the deal, which was believed to be on thin ice.
“COVID-19 has resulted in significant uncertainty for the airline industry, which made us doubt whether the combination of TRZ and AC would even occur,” Desjardins analyst Benoit Poirier said in a note to clients on Tuesday.
“We believe the revised agreement offers incentives for AC to obtain regulatory approvals for the transaction.”
The deal requires approval by Transat shareholders, who are set to vote in early December.
One portfolio manager who holds Air Canada stock said he believed Transat shareholders would have little option other than to approve it.
“This is the best that they are going to get in this environment.”