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Report on Business Quebec real estate investment firm Group Mach makes its bid for Transat

Montreal real-estate investment firm Group Mach Inc. says its unsolicited proposal to buy airline and tour operator Transat A.T. Inc. amounts to a non-binding offer at this stage, which means it is not subject to Canadian securities laws mandating firm financing for a deal.

“This is not a takeover bid necessarily. It can be structured otherwise,” said Mach spokesman Alfred Buggé, who leads the company’s mergers and acquisitions efforts. He said a deal could be shaped as a plan of arrangement, a merger or a takeover bid depending on the outcome of any potential negotiations with Transat.

“It’s not for us to dictate these things. We want it to be friendly and it’s a question of sitting down with Transat and agreeing on that,” Mr. Buggé said in an interview Friday. At this point, Mach’s proposal is similar to a typical letter of intent, he said.

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Questions about Mach’s proposal were raised after publication of a news release earlier this month in which the group offered to buy Transat for $14 a share in cash, conditional on a number of things, including winning lockup agreements from two of Transat’s big shareholders and obtaining $120-million from the Quebec government to help finance the deal. Mach’s proposal came after Transat entered exclusive talks (which are continuing) with Air Canada on an acquisition deal at $13 a share.

Under Canadian securities rules, all cash or partial cash takeover bids cannot be subject to finance conditions. Those rules don’t apply right now, Mr. Buggé said. There are many ways to gain control of a company, he said, including an asset deal or a private placement. Mach has filed a business plan with the government’s main investment arm, Investissement Québec, and expects to receive some news on its request for funding in the coming days, he said.

Transat confirmed in a statement Friday that it received from Mach what it called a “non-binding and conditional proposal letter" outlining Mach’s interest in privatizing Transat. But Transat was quick to note in the release that it remains in talks with Air Canada with a view to finalizing a definitive agreement.

At least one other serious potential bidder remains in the picture to make an offer for Transat. Dominik Pigeon of FNC Capital, a Montreal financial-services company specializing in management-led buyouts, is leading a group that is weighing a bid.

Two big shareholders in Transat have said Air Canada’s all-cash proposal, worth $520-million, is too low or is poorly timed, raising doubts it will receive the required two-thirds approval from shareholders. The Quebec government has been generally positive to the idea of Air Canada taking over its crosstown rival, saying it would create a stronger company.

Group Mach founder Vincent Chiara has said his group made the first approach to Transat earlier this year. He said he was surprised that Transat subsequently decided to enter into negotiations with Air Canada that freeze out other potential bidders.

“Our limit [on how much we’ll pay for Transat] depends on the desire of the government to want to intervene,” Mr. Chiara said in an interview with Montreal radio station 98.5 FM. “We were clear with the government that if we wanted a company that remains in Quebec, that keeps its head office here and operates in the interest of Quebeckers, that we were the option and that the government should intervene in this file, by providing either equity or debt."

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