It's been quite a rollercoaster ride for Canadian leisure airline Air Transat. The carrier went from having two high-profile bidders to now possibly having zero. With the Air Canada deal collapse, attention shifted to Quebec businessman Pierre Karl Péladeau. However, Péladeau said on Thursday that he had “no more interest” in the tour operator.
Unable to reach an agreement
Reports indicate that Quebec businessman Pierre Karl Péladeau, through his holding company Gestion MTRHP inc., is no longer interested in acquiring all shares of Air Transat.
Global News reports that he had been unable to agree on a price with the airline's largest shareholder, Letko, Brosseau & Associates, with Le Journal de Montreal, reporting the following statement from Péladeau:
“I have no more interest now. If I make a new offer, I know it won't work. So what's the point of doing it if we know that the largest shareholder will refuse?"
A month of evaluation
Due to Péladeau's public statements, reported on May 13th, Air Transat issued its own statement the following day. It said that the Quebec businessman made a non-binding proposal to acquire all of the shares of Transat for a consideration of C$5.00 ($4.12) per share on April 7th, 2021. It adds,
"Although this proposal required a response within two days, the parties have from that date and until May 13 continued their discussions on the basis of this proposal and it has been thoroughly reviewed by the special committee of independent directors responsible for evaluating any proposal to acquire the Transat shares with the assistance of financial and legal advisors."
Transat goes on to say that "it has taken note of Mr. Péladeau's public statements of [May 13th] but has not received any formal communication on this matter."
What's next for Air Transat?
With this news, it appears that there are three main possibilities for the airline's future:
- As no formal communication has taken place to withdraw the offer, the public statement by Péladeau could be a negotiating tactic to put pressure on shareholders to expedite the deal.
- If Péladeau is truly no longer interested, then Air Transat might be "back on the market," willing to entertain other offers.
- Alternately, in the absence of interested buyers with viable offers, Air Transat ownership remains as-is for the foreseeable future.
Regarding point number two, Le Journal de Montreal noted in its recent article that WestJet and Air France-KLM were also rumored to be interested buyers of Transat at some point. However, it's probable that these airlines (which have transatlantic operations of their own) would have been scared off by the failure of the Air Canada deal, which ended due to competition concerns and demands from the European Commission.
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With the global health situation improving and vaccinations being a key factor in resuming international travel, Air Transat could be a lucrative investment - especially if you believe in the existence of pent-up travel demand.
Additionally, the airline secured up to C$700 million ($577.46 million) in loans from the Canadian government last month. This provides added stability and security for the carrier and will allow the airline to plan its resumption of operations.
What do you think will happen to Air Transat now? Let us know in the comments.