Air Canada to get regulatory approval for purchase of Air Transat
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Transat shareholders back sale to Air Canada, look to 2020 for regulatory approval
Almost 95 per cent of votes cast at Friday’s shareholder meeting were in favour of the deal with Air Canada, Transat said.
|Jean-Marc Eustache, centre, defended the $11.7 million he would make from the deal: “I’ve been working non-stop, seven days a week for 42 years. … I earned it honestly.” DAVE SIDAWAY / MONTREAL GAZETTE|
Over to you, Ottawa and Brussels.
Transat A.T. Inc. shareholders resoundingly approved Air Canada’s $720-million acquisition of the Montreal-based tour and airline operator, putting the fate of the deal in the hands of regulators.
Almost 95 per cent of shareholders voted in favour of Air Canada’s improved $18-a-share cash offer at a special meeting in downtown Montreal, Transat said Friday. Two-thirds approval was required.
“You’ve made the right decision,” chairman and chief executive officer Jean-Marc Eustache told shareholders after the results of the vote were disclosed. The combination “will create a global leader, based in Montreal, in leisure, tourism and travel distribution. Joining forces with the power of Air Canada is the best way to preserve and develop what we created.”
Air Canada’s sweetened offer represents a 254-per-cent premium to Transat’s average stock price in the weeks before the company disclosed this spring it was in talks with unnamed suitors about a potential sale, Eustache said. He called it “probably the biggest premium ever seen in the airline sector.”
Air Canada and Transat will now work to secure approval from transport and competition authorities in Canada and the European Union. That will take several months, with Transat executives reiterating Friday that the deal will probably close early next year.
“It’s not a foregone conclusion that regulators will approve this as is,” Doug Taylor, an analyst at Canaccord Genuity in Toronto, said in a telephone interview. “We don’t know what kind of concessions Air Canada is going to have to make. They are going to have significant concentration on several routes.”
Canada’s biggest carrier may be forced to give up some takeoff and landing slots in cities such as Montreal to secure regulatory approval, other analysts have said. Air Canada accounted for about 42 per cent of all seat capacity on Canada-Europe flights this summer, with Air Transat controlling a further 18 per cent, according to National Bank Financial estimates.
For now at least, Transat seems unperturbed by the scrutiny.
“We are very confident that we will get the approval of the different regulatory authorities,” Jean-Yves Leblanc, a Transat director who headed the company’s special committee in charge of evaluating the offer, told reporters Friday.
Air Canada CEO Calin Rovinescu first approached Transat about a deal on Oct. 5, Eustache said Friday. On June 27, the companies announced they had reached a definitive agreement on a transaction valuing Transat at $520 million, or $13 a share. Air Canada agreed to maintain the Air Transat and Transat brands, as well as the company’s Montreal head office.
After key shareholders, including Montreal’s Letko Brosseau, said the original price was too low, Air Canada sweetened its bid to $18 on Aug. 11.
|Transat A.T. Inc. shareholders approved Air Canada’s offer to buy the company on Friday Aug. 23, 2019. Left to right, vice-president Bernard Bussières, CEO Jean-Marc Eustache, special-committee chairman Jean-Yves Leblanc. DAVE SIDAWAY / JPG|
“Mach was asking us to drop the firm offer to get involved in a negotiation, or an adventure, with an unknown outcome,” Leblanc said Friday.
Quebec’s biggest institutional investor, the Caisse de dépôt et placement du Québec, was among the shareholders that voted in favour of the Air Canada offer. The absence of an alternative bid was one of the key reasons behind the Caisse’s decision, Kim Thomassin, the fund manager’s chief legal officer, said in an Aug. 20 letter to her Air Canada counterpart that the Montreal Gazette obtained. Increased competition also played a role, Thomassin said.
“Things had become tough over the past two years,” Eustache, 71, said at a shareholder meeting. “We’ve not made money on sun destinations for the past 10 years. One year out of two, we don’t make any money on Europe. It’s becoming very difficult to compete in a globalized context.”
Eustache, who stands to make about $11.7 million once the deal closes, objected to a shareholder question about his compensation.
“I’ve been working non-stop, seven days a week for 42 years,” he said. “I don’t consider that I stole my shareholders’ money. I earned it honestly.”
Best known for its airline division, Transat has about 5,000 employees. Air Transat carried about 5 million passengers last year.
Flyers shouldn’t worry about a reduction in choice if Air Canada ends up buying Transat, Eustache said.
“We are in a global market, and there are competitors everywhere,” the CEO told reporters after the meeting. “Consumers will always have choice.”
Eustache cited the Montreal-Paris market, where Air Canada and Transat already compete with carriers such as Air France, Corsair and British Airways’ Level unit.
Transat’s CEO also felt compelled to defend his suitor’s Quebec credentials. As recently as Monday, Québecor CEO Pierre Karl Péladeau, a Transat shareholder, had criticized Montreal-based Air Canada for failing to honour its commitments to the province over the years.
“Air Canada is Québécois,” Eustache told reporters. “The head office is in Quebec. All the management team is in Quebec. So I have no philosophical problem with that.”
Still, some remain unconvinced. In its letter to Air Canada, Thomassin of the Caisse chided the company for providing few details on its “vision” for Transat.
“We wish to understand how Air Canada plans to give Air Transat and its employees a key role and ensure the preservation of a cutting-edge expertise” in Quebec, she wrote. Air Canada “should clearly indicate to stakeholders its commitment in this regard.”
—— AUTO – GENERATED; Published (Halifax Canada Time AST) on: February 11, 2020 at 12:12PM