Higher bid for Transat unlikely: analysts
Analysts say it’s unlikely another bidder will emerge to trump Air Canada’s $520-million proposed takeover of rival Transat AT Inc., nor is it likely to be waylaid by required reviews by federal transport and competition regulators.
Shares in the parent company of airline Air Transat were little changed Friday after rising more than 13.4 per cent on Thursday to a closing price of $12.
That’s a dollar less than the $ 13 per share or $ 520 million offer Air Canada announced Thursday, as it said it had entered into a 30- day exclusive arrangement with Transat to try to negotiate its purchase.
Air Canada shares, meanwhile, rose by 1.6 per cent by 3 p. m. EDT on Friday to a new high of $ 41.04. They ended the day at $40.93.
Analyst Kevin Chiang of CIBC World Markets says he’s not expecting a higher bid, noting the $13 offer represents a premium of 148 per cent over the 20-day average share price before Transat announced on April 30 that it was in discussions with unnamed parties for a potential sale.
National Bank analyst Cameron Doerksen says there’s “a strong likelihood” the deal will proceed because Air Canada’s offer is probably financially superior to other offers Transat may have reviewed, plus Air Canada brings operational synergies to the table.
Independent airline analyst Rick Erickson says he doesn’t know of any domestic party that could afford to outbid Air Canada, pointing out that foreign ownership of any Canadian airline is limited to 49 per cent.
The deal provides for a break fee of $15 million payable by Transat if it accepts a superior offer.
“We believe another bidder is possible but unlikely,” said Altacorp Capital analyst Chris Murray in an email. “You would have to find someone who meets the Canadian ownership rules, is willing to write a cheque of that magnitude and would be acceptable to all regulators .... As well, the Quebec government will be very sensitive to who the owner may be.
“Finally, they better know what they’re doing, otherwise we would see Transat in some trouble.”
Meanwhile, consumers will likely see little change in their travel choices or ticket prices if Air Canada buys Transat AT Inc., industry observers said Friday. Some observers said Thursday they fear a successful bid will result in fewer choices and higher ticket prices but Altacorp Capital analyst Chris Murray said Friday there’s more likely to be an expansion of routes.
“As to competition and pricing, I don’t see the combination impacting competition as you still have a number of Canadian competitors including Westjet and the new ULCCS ( ultra low- cost carriers), including Flair Airlines, as well as international carriers,” he said in an email.