Air Canada’s planned takeover of rival Transat A.T. Inc. is now up in the air after a Feb. 15 deadline the companies set to complete the deal passed while they await approval from European regulators.
The two companies have been discussing unspecified “potential amendments” to their deal that could keep it alive, Transat said in a statement Tuesday. But Air Canada won’t agree to extend the deadline, which means either company now has the right to walk away at any time, Transat said.
“At this time, it is difficult to gauge Air Canada’s commitment and engagement regarding the proposed transaction as market conditions have deteriorated over the last months,” Desjardins Securities analyst Benoit Poirier said in a note, adding that he expects other parties will step up and show their interest in Transat.
Montreal-based Transat disclosed on Jan. 12 that it had received an unsolicited takeover proposal, without demonstrated committed financing, of $5 a share from an investment firm controlled by Quebec media magnate Pierre Karl Péladeau. Toronto-based investment manager Onex Corp. and Calgary-based WestJet Airlines Ltd. could also be interested, according to Desjardins.
Transat shares fell 8 per cent, to $4.82, in Tuesday morning trading on the Toronto Stock Exchange. Air Canada stock rose 2 per cent, to $22.82.
In a post on his Facebook page Saturday, Mr. Péladeau said he believed Air Canada would be unable to conclude the transaction by the Feb. 15 deadline and accused Canada’s dominant airline of delaying the European regulatory analysis by failing to provide information in a timely way.
“Transat board members will regain the freedom allowing them to ensure the company’s continuity, its outreach in the community and the considerable economic benefits it holds for Quebeckers,” Mr. Péladeau wrote. “I invite them to find reasonable the terms of an agreement with my group so we can save Transat, together.”
Mr. Péladeau reaffirmed in a statement late Tuesday his desire to buy Transat and said he wants to start talks with the company to allow it to “get out of the uncertainty” that has plagued it for some time.
Air Canada spokesman Peter Fitzpatrick said the agreement remains in place unless and until either party terminates it. He said there was no update beyond that, adding that the company’s ability to discuss the transaction is “limited by various confidentiality, governance, contractual and other considerations.”
Montreal-based Air Canada announced its intention to buy Transat, an international tourism company specializing in holiday travel, in June, 2019, shortly after WestJet said it was being bought by Onex. Air Canada subsequently hiked its bid to $18 a share to win over hesitant Transat investors for an equity consideration of about $720-million.
That offer was revised downward to about $190-million after the pandemic hit, given the prospects for all airline companies amid the collapse in demand for air travel. In December, Transat shareholders approved Air Canada’s new offer of $5 a share in cash or 0.2862 of an Air Canada share for each Transat share.
The Canadian government approved the takeover last week but applied conditions to a deal, including a minimum number of jobs that must be preserved. Ottawa said that in reviewing the deal, it took into account the pandemic’s effect on the companies and concluded the takeover was in the public’s best interest.
The European Commission also has to approve the deal because the two companies have a large presence in that market. The EC suspended its investigation of the deal in late December as it awaited more information from the two carriers.
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