Air Canada (AC, Montréal Trudeau) is in talks to buy Canadian leisure group Transat Inc. for CAD520 million Canadian dollars (USD386 million), the two parties have jointly confirmed.
Transat Inc., which owns Air Transat (TS, Montréal Trudeau), said in a statement that it had agreed to a 30-day period of exclusive negotiations with Air Canada after the two signed a Letter of Intent (LOI). Under the offer, Air Canada would acquire all of the shares of Transat for CAD13.00 (USD9.65) per share.
"A combination with Transat represents a great opportunity for stakeholders of both companies," Calin Rovinescu, President and Chief Executive of Air Canada, said.
"This includes the shareholders of both Transat and Air Canada, employees of both companies, who will benefit from increased job security and growth prospects, and Canadian travellers, who will benefit from the merged company's enhanced ability to participate as a leader in the highly competitive leisure travel market globally. 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, where we have added 35 new routes since 2012 to the benefit of the Montreal and Quebec communities, and from which we carried 10 million customers in 2018 alone."
During the 30-day exclusivity period, Air Canada will undertake a due diligence of Transat following which a final agreement will be negotiated. Should the transaction take place, it will still be subject to both companies' shareholder approvals as well as Canadian regulatory scrutiny.
Given that Air Transat and Air Canada control a combined 54.74% of the 184,906 total weekly seats in the Canada-Europe market, any possible merger would likely come up against stiff resistance from Canada's Competition Bureau as well as WestJet (WS, Calgary) which controls 4.86% of the market via 8,986 seats/week.
