Travel firm challenges Mach’s bid to buy stake
Air Transat’s owner is turning to securities regulators in a bid to derail Mach Group Inc.’s offer for part of the company — while blasting the proposal and urging shareholders to reject it.
On Tuesday, Transat A.T. Inc. filed an application with Quebec’s Tribunal administratif des marchés financiers to challenge the Mach offer, according to a company statement. Transat stressed it’s “reviewing other potential legal proceedings with the goal of protecting shareholders from the scheme and defending their interests, and the integrity of capital markets.”
On Friday, Mach offered to buy 19.5 per cent of Transat A.T. Inc.’s Class B voting stock for $14 a share in order to block the travel company’s proposed sale to Air Canada. The property owner and developer said it has no intention of launching any formal hostile takeover bid for all of Transat’s voting shares.
Mach’s offer is “highly abusive, coercive, misleading and conditional,” Transat said Tuesday in a letter to shareholders that was posted on its website. The arrangement with Air Canada is “in the best interest of all Transat stakeholders,” the company added.
Mach argues the sale process was flawed because Transat didn’t take into consideration an earlier conditional offer by the real estate company — which was never firmed up. Mach also says its current offer will generate immediate liquidity for shareholders, while the Air Canada deal — for $13 a share — will require several months to be completed.
Following a six-month process, Transat and Air Canada announced June 27 they had reached a definitive agreement on an allcash transaction that values the tour and airline operator at $520 million. The Air Transat and Transat brands will be maintained to complement those belonging to Air Canada, while Transat’s Montreal head office and key functions will also be preserved, the companies said.
Transat shareholders are scheduled to vote on Air Canada’s offer on Aug. 23 in Montreal. At least two-thirds of holders must approve the proposal. Assuming all conditions are met, the deal is expected to close in early 2020.
Letko Brosseau, Transat’s biggest shareholder with a 19-percent stake, has publicly come out against the Air Canada deal, saying it undervalues the company. Transat’s second-largest holder, Fonds de Solidarité FTQ, is still analyzing the arrangement, said Patrick McQuilken, a spokesman for the labour fund, on Tuesday. It holds about 12 per cent.
Mach’s latest salvo may result in Air Canada sweetening its offer for Transat, according to Kevin Chiang, an analyst with CIBC World Markets in Toronto.
“We question whether this move will garner sufficient support from Transat’s shareholders, but would also not be surprised if Air Canada modestly raises its bid to get this deal across the line,” Chiang said Tuesday in a note to clients. Air Canada “is the most logical buyer and we see a significant amount of synergies.”
Raising the bid for Transat would probably cost Air Canada about $35 million, Chiang estimates, which is well within the company’s means. Canada’s biggest airline had $5.9 billion of cash and cash equivalents as of June 30.
Transat’s disappointing financial performance is one of the factors that led the company to consider the possibility of a sale, according to a regulatory filing made last month. In January, Transat’s board concluded that the company’s ability to deliver on its five-year strategic plan “and achieve its expected results would require several years and represented a significant risk in the medium and long term,” according to the filing.