Air Canada in talks to buy Transat airline for $387mn

Bloomberg

Air Canada said it’s in exclusive talks to buy one of the country’s largest travel tour operators, Transat AT, for about $387 million amid a wave of consolidation in the Canadian airline industry.
The country’s largest airline said in a statement it was prepared to pay C$13 a share for the Montreal-based company, a 23 percent premium to Transat’s closing share price. The offer is more than double Transat’s price on April 30 when it announced it was in talks with at least one potential buyer.
The move comes just three days after Air Canada’s rival WestJet Airlines Ltd agreed to be acquired by Canadian private equity firm Onex Corp for C$3.5 billion in cash. The offer from Toronto-based Onex was at a 67 percent premium to WestJet’s stock price.
“A combination with Transat represents a great opportunity for stakeholders of both companies,” said Calin Rovinescu, Air Canada’s chief executive officer, in the statement. “The acquisition presents a unique opportunity to compete with the very best in the world when it comes to leisure travel. It will also allow us to further grow our hub at Montréal-Trudeau Airport.”
The decision by Air Canada to pursue Transat was unexpected but “not overly surprising,” said Walter Spracklin, an analyst with RBC Capital Markets in Toronto. He said the tie-up would allow for increased scale, create better discipline and improve fundamentals in the Canadian travel-tour sector. It would also allow Air Canada access to Transat’s fleet of Airbus A321 aircraft when airline capacity is in limbo due to the Boeing 737 MAX grounding.
Air Canada’s management has not come to a decision
on the hotel operations at Transat, and Transat has agreed to limit any undertakings or expenses related to its hotel strategy during the exclusivity period, Spracklin said.