Air Canada says it will spend more to buy Transat A.T. Inc. upping its total offer by $200 million and winning the support of the tour company's largest shareholder. A model airplane is seen in front of the newly revealed Air Canada Boeing 787-8 Drea
Air Canada's (AC.TO) revised C$720 million ($544 million) bid for Canadian tour operator Transat AT (TRZ.TO) is a fair offer and should secure investor backing for the transaction, Transat's fourth-largest shareholder said on Monday.
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 PenderFund Capital Management.
Under the terms of the Lock-up and Support Agreement, Letko Brosseau has agreed to support and vote all of the Class B voting shares of Transat it controls at the August 23 Special Meeting of Shareholders of Transat in favour of Air Canada's acquisition of Transat. "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.
Mach Group had offered C$14 per share, but a Quebec securities regulator blocked it on August 12.
Transat's airline primarily ferries passengers in packaged vacations.
"Given the substantially higher bid by Air Canada and the decision of the Tribunal, the noise surrounding Group Mach's proposal has all but disappeared", Nazir added.
"We are very pleased by the added stability brought about by Air Canada's increased bid as supported by Transat's largest shareholder, Letko Brosseau".
"If there's anything to take from all this it's that thank God Mach was there because we're the one that extracted the $18 price today", Buggé said.
Air Canada has enough cash on hand to cover the extra $200 million.
Two Air Canada Boeing 737 MAX 8 aircrafts are seen on the ground as Air Canada Embraer aircraft flies in the background at Toronto Pearson International Airport in Toronto, Ontario, Canada, March 13, 2019. "The Quebec economy will derive maximum advantage of having a Montreal-based, growth-oriented global champion in aviation, the world's most worldwide business, spurring more employment and securing Montréal's position as a leader among world aviation centres". Mach said it had no intention of launching any formal hostile takeover bid for all of Transat's voting shares. The real estate developer offers $14 per share. It prohibited Mach from buying shares under its proposal and ordered it to return any shares already deposited.
Buggé called the ruling "absurd and erroneous" while acknowledging Mach's options are limited.
"We're not ready to make a decision yet", he said.
"Regulatory hurdles for this transaction should not be considered a foregone conclusion", Doug Taylor, an analyst with Canaccord Genuity in Toronto, said Monday in a note to clients. "However, assuming only minor concessions on Air Canada's part, we think the transaction is a strong strategic fit with significant synergy potential".
Shareholders are scheduled to vote on the new offer next week.
Even if Transat shareholders approve the sale of the company, Air Canada will still need to get the nod from such authorities as the national Competition Bureau, which at least one industry observer says is anything but automatic.
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