• Joe Breitfeller

Air Canada and Transat Complete Amended Transaction for Combination of Carriers

Updated: Feb 8

Transat’s Board of Directors has unanimously approved the transaction, which values their shares at CAD $5.00 and recommends shareholder approval. Air Canada has also approved $250 million in increased borrowings by Transat upon transaction completion.


Air Canada Boeing 787 Dreamliner Empennage - Courtesy Air Canada

On Saturday (October 10, 2020), Air Canada announced the conclusion of an amended transaction for the combination of the company with Transat A.T. Inc. The transaction will allow Air Canada to acquire all issued and outstanding shares of Transat for $5.00 per share. The revaluation of share price reflects the reduced value of both airlines as a result of the global COVID-19 pandemic and Transat shareholders will have the option to be paid in cash or receive shares in Air Canada at a fixed exchange ratio of 0.2862 shares for each Transat share. The exchange rate reflects an Air Canada share price of $17.47, valuing the deal at around $190 million (all amounts are in Canadian Dollars).


The amended transaction was unanimously approved by Transat’s Board of Directors and they recommend shareholder approval. Air Canada has also approved $250 million in increased borrowings by Transat. In Saturday’s announcement, Air Canada’s President and Chief Executive Officer, Calin Rovinescu, said,


"COVID-19 has had a devastating effect on the global airline industry, with a material impact on the value of airlines and aviation assets. Nonetheless, Air Canada intends to complete its acquisition of Transat, at a reduced price and on modified terms. This combination will provide stability for Transat's operations and its stakeholders and will position Air Canada, and indeed the Canadian aviation industry, to emerge more strongly as we enter the post-COVID-19 world."


The transaction remains subject to approval by shareholders, courts, the Toronto Stock Exchange and Canadian and European Union regulators and is expected to be completed in January or February 2021. The new $5.00 share price represents a 31.6% premium over the 20-day volume weighted average moving price (VWAP) of Transat’s shares on October 8, 2020, and the company’s advisors (National Bank Financial and BMO Capital Markets) have stated that they believed the consideration was fair.


In a separate announcement on the transaction Saturday, Transat’s President and Chief Executive Officer, Jean-Marc Eustache, stated,


"With the volume now forecasted to be down 66% worldwide at the end of 2020, it is clear that the world has changed since the signing of the original agreement in June 2019. This is the worst crisis since the founding of Transat 33 years ago and with a second wave of the pandemic underway, the timing of an eventual recovery remains uncertain. More than ever, having a national airline with the scale to weather current industry turbulence, which is expected to continue for several years, is in the best interests of our shareholders, customers, employees and other stakeholders."


Air Canada is Canada’s largest domestic and international airline, serving over 51 million guests in 2019. The Canadian flag carrier is a founding member of the Star Alliance and the only international network carrier in North America to receive a Four-Star ranking from Skytrax, who also named the carrier ‘2019 Best Airline in North America.’


Based in Montreal, Transat A.T. Inc. (TSX: TRZ) is the third largest airline in Canada and leading integrated tourism company specializing in holiday travel. The company offers vacation packages, hotel accommodations and air service to more than 60 destinations over 25 countries in the Americas and Europe and employs over 5,000 team members. Air Transat has been named ‘World’s Best Leisure Airline’ at the Skytrax World Airline Awards. The company is firmly committed to sustainable tourist development and was awarded Travelife certification in 2018.


Source(s): Air Canada, Transat A.T. Inc.

0 comments