On Monday, June 21st, Canadian leisure carrier Air Transat announced that its ongoing discussions with a Quebec businessman have concluded without an agreement for an acquisition. Mr. Pierre Karl Péladeau was looking to acquire the carrier for C$5 per share. However, with optimism building for the Canadian aviation industry, the airline’s share price has soared past this number.
No longer an attractive offer
It’s been an ongoing ‘back-and-forth’ ordeal between Air Transat and Pierre Karl Péladeau. The Canadian media CEO had raised some controversy earlier this year, accusing Air Transat of ignoring his offer and instead going with Air Canada- a deal which has since collapsed.
On April 7th, 2021, Péladeau made a non-binding proposal to Transat, which would have seen his company, MTRHP, acquire all of the shares of Transat for a consideration of C$5.00 per share, payable in cash. However, Air Transat no longer sees this as an attractive offer and has officially ended its discussions with Péladeau. It had offered the following explanation in an official statement:
“Considering the current share price, the price offered no longer provides a reasonable basis to envision receiving the level of shareholder approval required in order to allow the transaction to proceed. Accordingly, MTRHP confirmed to the Corporation that it was withdrawing from the discussions.”
Air Transat worth considerably more this month
Thanks to falling COVID-19 case numbers made possible by a robust vaccine rollout, the government of Canada has been able to ease some of its travel restrictions. While its international travel advisory is still in effect, it has at least eased quarantine requirements for fully vaccinated Canadians returning from abroad.
This shift in policy was announced yesterday. However, enough anticipation and speculation was present the weeks prior to send Air Transat’s share price up. While mid-May saw a low value of C$4.31, it has reached a recent high of C$7.26. This is a gain of nearly 70% and almost double the company’s five-year low of C$3.65, witnessed in October 2020.
At the time of writing, C$1 is equivalent to US$0.81.
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What happens next?
Air Transat says that “in light of the foregoing, the work of the special committee charged of reviewing strategic alternatives will cease,” meaning that, in terms of ownership, the company will remain as-is.
“Transat intends to focus its efforts on the implementation of its strategic plan and on the upcoming restart of its operations and flights, on July 30.” -Air Transat
At the same time, the carrier and its parent company says it will examine possibilities to “optimize its financing structure,” which it says could include the issuance of shares or bond financing. In essence, the airline is looking to find cheaper ways of covering its debts. The airline has been a beneficiary of the Canadian government’s “Large Employer Emergency Financing Facility (LEEFF).”
Do you think Transat is making the right call? Let us know by leaving a comment.