Air Canada has bought Air Transat in a deal worth a reported $520m. Following several months of negotiations and a last minute threat from a real estate developer, Air Canada’s offer of $13 per share has been unanimously approved by the Transat Board.
Air Canada have successfully eliminated a competitor in their marketplace by acquiring Air Transat in a massive deal worth an estimated $520m. Air Canada announced the purchase today, following several months of negotiations and worries that they could be gazumped.
Air Canada first announced the purchase of Air Transat back in May, with the deal pegged at around $13 a share. However, while the two companies were working out the details, in stepped a second bidder with a rival offer. Mach Inc reportedly offered an additional $1 per share over Air Canada’s bid, sparking fears of an ensuing bidding war.
However, it seems Mach Inc’s offer was rejected, as Air Canada confirm today that they have ‘concluded a definitive Arrangement Agreement’ to acquire Transat. Undoubtedly Air Transat’s fleet of new-ish, all Airbus aircraft lent something to its appeal, considering the number of 737 MAX aircraft Air Canada currently has grounded.
The details of the deal
Air Canada’s press release on the matter still pegs the deal at $13 per share. It’s an all-cash transaction, and is thought to be worth a total of $520m. In a statement in the press release, Calin Rovinescu, President and Chief Executive Officer at Air Canada, said,
“We are delighted to have reached this definitive agreement to combine Transat with Air Canada to achieve the best possible outcome for all stakeholders. For shareholders of Transat and Air Canada, this combination delivers excellent value, while also providing increased job security for both companies’ employees through greater growth prospects.”
Air Canada say that the deal has been on the cards since they approached Transat in autumn 2018. Discussions have been bouncing back and forth since then, which culminated in a Letter of Intent being published in May. The two entities had to conduct due diligence prior to the deal going through but secured unanimous support of the Air Transat Board of Directors today for the deal to be completed.
The deal still has to meet with shareholder approval, which will naturally take some time. Canada’s competition watchdog will undoubtedly also want to scrutinize the deal, given that the two airlines combined will represent a 60% share of transatlantic travel from Canada. If all goes to plan, everything should be finalized by early 2020.
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What will become of Air Transat?
Air Transat is Canada’s third biggest airline, with around 5,00 employees and a fleet of 38 aircraft. The airline has traditionally operated charter flights from 19 cities in Canada to holiday destinations across some 60 destinations in more than 25 countries.
As well as the airline business, Air Transat operates a travel agency with hotels and package holidays included, hence the interest of Mach Inc in the purchase. Recently their winter schedule indicated that they would be opening more routes later this year, but will that still happen now they’re part of Air Canada?
It looks like they will, as the plans seem to be to allow Air Transat to continue doing what it does best. In his statement, Rovinescu said,
“Air Canada intends to preserve the Transat and Air Transat brands and maintain the Transat head office and its key functions in Montreal … Travelers will benefit from the merged companies’ enhanced capabilities in the highly competitive, global leisure travel market and from access to new destinations, more connecting traffic and increased frequencies.“
Air Canada have been firm in their commitment to keeping Air Transat running as it does. They have said that all bookings already made with the airline will be honored, and that bookings can continue to be made directly with Transat, with no worries for travelers.
What do you think? Was this a good buy for Air Canada? Let us know in the comments.