Air Canada cleared for land­ing Transat

The Prince George Citizen - - Money -

Que­bec’s se­cu­ri­ties tri­bunal has barred a de­vel­oper’s of­fer to buy up Transat shares, halt­ing Group Mach’s bid to block the tour op­er­a­tor’s sale to Air Canada – and leav­ing the coun­try’s largest air­line as the only player pub­licly vy­ing for the com­pany.

The de­ci­sion comes one day af­ter Air Canada upped its takeover of­fer by $200 mil­lion in an ef­fort to win share­holder sup­port for its bid to take Transat pri­vate.

The new of­fer would see the car­rier spend $18 per share, rather than $13, bring­ing the to­tal of­fer to about $720 mil­lion, up 38 per cent from a pre­vi­ously an­nounced bid worth $520 mil­lion.

The would-be deal sent Transat shares soar­ing by $4.96 or nearly 42 per cent to close Mon­day at $16.77, their high­est price in more than eight years.

Letko Brosseau and As­so­ciates – Transat’s big­gest share­holder at 19.3 per cent – has now given for­mal sup­port to the fresh of­fer from Air Canada, the air­line and Transat said. The in­vest­ment firm said ear­lier this sum­mer it would vote against the deal if the price stayed at $13 per share.

Group Mach’s of­fer of $14 per share for 19.5 per cent of class B vot­ing shares rep­re­sented the only ri­val bid.

The tri­bunal rul­ing, which says the bid “con­sti­tutes an abu­sive of­fer con­trary to the public in­ter­est,” means the Mon­treal-based com­pany can­not ac­quire any shares un­der its scheme and must re­turn to share­hold­ers any stocks al­ready de­posited.

The com­pany is also for­bid­den from us­ing any prox­ies as­so­ci­ated with shares de­posited un­der the plan.

Transat spokesman Christophe Hen­nebelle said Air Canada’s in­creased of­fer Sun­day came af­ter meet­ings with the tour com­pany’s big­gest share­hold­ers, which in­clude the Fonds de Sol­i­darite FTQ, the Caisse pen­sion fund man­ager and Pen­der-Fund Cap­i­tal Man­age­ment.

“Ob­vi­ously it’s Air Canada’s de­ci­sion. But it hap­pened af­ter con­sul­ta­tions with Transat’s ma­jor stock­hold­ers, in­clud­ing Letko Brosseau, with whom we are now an­nounc­ing a lockup agree­ment,” Hen­nebelle said in a phone in­ter­view.

Group Mach chief ex­ec­u­tive Vin­cent Chiara ques­tioned the judg­ment of Transat’s board, call­ing its en­dorse­ment of the orig­i­nal Air Canada bid “dis­turb­ing.”

“They still need to be ac­count­able to share­hold­ers on why they pushed that $13-per-share of­fer like they pushed it,” Chiara told The Cana­dian Press.

Transat has agreed to an in­creased break-fee of $40 mil­lion, while Air Canada’s break-fee re­mains $40 mil­lion.

Share­hold­ers are slated to vote on the Air Canada of­fer Aug. 23, which is ex­pected to face in­tense scru­tiny from the Com­pe­ti­tion Bureau and other reg­u­la­tory au­thor­i­ties.

Air Canada and Transat com­mand a com­bined 60 per cent slice of the transat­lantic mar­ket from Canada, over­lap on some sun des­ti­na­tions and main­tain a firm hold on Mon­treal air travel.

How­ever, Transat has posted net losses two of the last three years, with a loss of nearly $20 mil­lion fore­cast for 2019, ac­cord­ing to fi­nan­cial mar­kets data firm Refini­tiv.

“We view the take-out price is rather gen­er­ous given Transat’s volatile prof­itabil­ity pro­file,” said an­a­lyst Mona Nazir of Lau­ren­tian Bank Se­cu­ri­ties in a note to in­vestors.

CP PHOTO

An Air Transat plane is seen as an Air Canada plane lands in May at Pierre Elliott Trudeau In­ter­na­tional Air­port in Mon­treal.

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