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Air Transat and an Air Canada aircraft on the tarmac at Montreal-Trudeau International Airport in Montreal, on April 8, 2020.

Paul Chiasson/The Canadian Press

Shareholders of Montreal-based airline Transat AT Inc. Transat AT Inc. voted for the second time in favour of Air Canada’s Air Canada’s takeover offer, this time accepting a price steeply reduced by the collapse in air travel brought about by the pandemic.

The result on Tuesday morning turns the focus to required approvals of the deal by the Canadian government and the European Commission. Air Canada will pay $5 in cash or 0.2862 of its own shares for each Transat share, for a total of $180-million. If the deal does not receive regulatory approvals by Feb. 15, Air Canada can walk away.

Transat said before the online vote took place that it received a rival, higher offer in November. But the airline decided it was inferior to Air Canada’s and did not send it to shareholders, Transat said, without elaborating.

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Jean-Marc Eustache, chief executive officer of Transat, said on a webcast press conference on Tuesday he expects to receive regulatory approval for the takeover. But if not, the company will carry on alone, borrowing $500-million – possibly under a federal government lending program – after recently tapping $250-million financing.

“We have a business plan to continue the company,” said Mr. Eustache, a co-founder of the carrier and tour company in the 1980s. “For sure we will need some cash, like any other airline in the world.”

The deal, which required approval by two-thirds of votes cast, was backed by 91 per cent.

Air Canada offered $13 a share for Transat in June, 2019, and was forced to raise its price after competing bids surfaced. Shareholders approved Air Canada’s $18 a share offer worth $720-million, in August, 2019.

As the deal wound its way through antitrust and public interest approvals in Canada and Europe, the COVID-19 pandemic took hold. Demand for air travel vanished in March, 2020, amid fears of infection, closed borders and government warnings against travel. Air Canada renegotiated the deal and the lower price was announced in October.

Transat halted operations for four months in the pandemic, resuming a small number of routes in July with about 75 per cent of its employees on furlough. Transat said last week it lost almost $500-million in fiscal 2020, as revenue fell by 56 per cent to $1.3-billion.

Transat’s share price rose by 18 per cent to $6.22 on the Toronto Stock Exchange on Tuesday, a discount to the $7.49 value based on the exchange ratio with Air Canada’s shares. Analysts say this is a reflection of the risk the deal falls apart. Air Canada’s share price changed little on Tuesday, at $26.34.

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Transat’s biggest shareholders collectively own about 32 per cent of the company. Investment managers Letko, Brosseau & Associates, which owns 14 per cent, and Fonds de solidarité FTQ, owner of 12 per cent, did not respond to interview requests. A spokesman for Caisse de dépôt et Placement du Québec, which owns 6 per cent, declined to comment.

Mr. Eustache told reporters the price of the rival offer in November was not the only factor the board considered.

Jean-Yves Leblanc, an independent Transat director, said the board compared the unsolicited offer with Air Canada’s and took into account regulatory issues, given the unnamed investor is not in the tourism industry.

The European deadline for approval is Feb. 9, 2021. The Canadian ruling has no announced timeline.

Benoit Poirier, a Desjardins stock analyst, said the Air Canada takeover offers Transat and its shareholders the best chance at surviving the pandemic. He pointed out Transat shares are trading at a discount to the offer, an indication the market believes there is a risk regulators say no. In this case, he said he thinks WestJet Airlines owner Onex Corp. could step in as a buyer.

Editor’s note: An earlier version of this article incorrectly quoted Transat AT Inc. director Jean-Yves Leblanc. He did not say why an unsolicited offer to buy the company from an unnamed investor was considered inferior. Rather, he listed some of the criteria by which the bid was evaluated, including the degree of certainty the deal would get regulatory approval and a comparison with Air Canada’s offer.

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