National Post (National Edition)
Transat insiders could make $35M in Air Canada deal
BOARD, EXECS
MONTREAL • Transat A.T.
Inc. executives and directors collectively stand to make more than $35 million if Air
Canada completes its purchase of the leisure travel company.
Chairman, chief executive officer and co-founder Jean-Marc Eustache has the most riding on the deal. He would receive about $11.7 million — reflecting the shares he owns, options and a “replacement bonus” of $896,114, according to Transat’s management proxy circular, which was published Tuesday.
Air Canada and Transat announced June 27 that they had reached a definitive agreement on an all-cash transaction that values the tour and airline operator at $520 million. The Air Transat and Transat brands will be maintained, as will Transat’s Montreal head office and key functions, the companies said.
Transat shareholders are scheduled to vote on Air Canada’s $13-a-share offer on Aug. 23 in Montreal. At least two-thirds of shareholders must approve the proposal. Assuming all conditions are met, the deal is expected to close in early 2020, Transat said in Tuesday’s filing.
Letko Brosseau, Transat’s biggest shareholder with a 19-per-cent stake, has publicly come out against the deal, saying it undervalues the company. Transat’s second-biggest shareholder, Fonds de Solidarité FTQ, hasn’t commented on the offer.
A spokesperson for the Fonds, which owns 12 per cent of Transat, said Tuesday the labour fund is still studying the circular and isn’t immediately able to comment. Peter Letko, Letko Brosseau’s CEO, didn’t immediately respond to a voice mail message seeking comment.
Director Philippe Sureau, one of Transat’s co-founders, is the other big beneficiary of the transaction. He would make about $4.5 million if Air Canada succeeds in buying the company.
Canada’s largest airline first approached Transat about a potential transaction in October, with Air Canada CEO Calin Rovinescu discussing the matter with Eustache at a private meeting.
In December, Air Canada presented a non-binding proposal that contained a number of conditions, including minimum cash levels that Transat was required to meet. Transat rejected the offer.
After both parties signed a confidentiality agreement in February, discussions resumed in April and led Air Canada to revise its offer twice. The parties announced May 16 that they had agreed to hold exclusive negotiations that would eventually lead to the definitive cash offer.
Transat’s disappointing financial performance is one of the factors that led the company to consider the possibility of a sale.
When it met in early January to review the performance for the fiscal year that ended Oct. 31, Transat’s board concluded that the company’s ability to deliver on its 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 circular.
Air Canada wasn’t the only suitor involved. Groupe Mach, a Quebec real estate developer with no previous involvement in running an airline, first contacted Transat in January to discuss a potential deal.
Discussions stretched over several months, though they were halted in early May when Mach insisted on being granted exclusivity. In June, Mach publicly disclosed it was ready to offer $14 a share for Transat — before saying two weeks ago it would not submit a “superior proposal” for the company.
Despite repeated requests, Mach “did not include any financing offer or commitment supporting its proposal or any evidence of its liquidity levels or cash on hand in order to demonstrate its financial capacity to proceed with its proposed transaction,” Transat said Tuesday in its filing.
Another suitor, identified only as “a group with international operations,” also approached Transat this year to discuss a “possible strategic transaction,” according to the circular. A May 7 meeting between Eustache, his chief financial officer, his general counsel and top executives of the unnamed company “did not lead to any viable alternative,” Transat said. There were no further contacts after that date.