Canada’s Air Transat ends Péladeau acquisition talks

Tour operator Transat AT and Canadian media mogul Pierre Karl Péladeau have abandoned discussions about the potential acquisition of Air Transat (TS, Montréal Trudeau). In April 2020, Péladeau submitted a non-binding offer by which his investment firm Gestion MTRHP would have acquired all of the shares of Air Transat for CAD5 Canadian dollars (USD4) per share, payable in cash. “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,” Transat AT confirmed in a statement. Air Transat’s share price recovered since the beginning of June to exceed CAD7 (USD5.6) per share. In light of this, the work of a special committee charged with reviewing strategic alternatives would cease, the tour operator said. Air Transat would now focus its efforts on implementing its strategic plan and the upcoming restart of its operations and flights on July 30. As contemplated in its strategic plan announced on June 10, Air Transat intends to examine how to optimise its financing structure.

This could include issuing shares of its capital or bond financing on more favourable terms than those attached to a portion of the liquidity made available to Air Transat under the Large Employer Emergency Financing Facility (LEEFF), the parent company said. On April 29, 2021, Transat announced it had reached an agreement with Ottawa to borrow up to CAD700 million (USD578 million) in additional liquidity through the LEEFF, which would allow it to plan for the resumption of its operations and the implementation of its strategic plan.

Having been grounded from January 29 to April 30, 2021, under Canada’s strict COVID-19 lockdown rules, Air Transat’s strategic plan will see it relaunch as a smaller operator in the leisure travel and visiting friends and relatives (VFR) sectors, which are expected to recover sooner than business travel. The latest announcement ends a two-year process during which Air Canada (AC, Montréal Trudeau) (before COVID-19) first offered to buy Air Transat for CAD720 million (USD581.5 million).

The offer was finally reduced to CAD180 million (USD148 million) and then abandoned in April this year when the deal failed to get anti-trust approval from the European Commission (EC). Péladeau had made a competing bid in December 2020. He repeated his offer after the deal with Air Canada fell through, but in May already indicated he was no longer interested following a disagreement with Air Transat shareholders over the airline’s valuation. The Canadian government earlier this year claimed that other Quebec investors, other than Péladeau, had expressed interest in acquiring Air Transat, but no bids ever materialised.