Investors involved in Air Canada's acquisition of vertically integrated tour operator Transat AT, which owns Air Transat (TS, Montréal Trudeau), have expressed their concerns over the CAD720 million Canadian dollar (USD512 million) price tag, arguing that the deal should be renegotiated given the current turmoil in the aviation industry, according to a report on Reuters. Transat shareholders signed off on a CAD18 (USD12.81) per share bid last year - however, on May 1 its shares were trading at 44% below Air Canada's offer price.
"There is no way the deal should proceed as structured," said Norman Levine, Managing Director of Portfolio Management Corporation to Reuters. "The whole world has changed in the airline/travel business and valuations from when the deal was announced to today bear no resemblance to each other," added Levine.
Confidential sources close to the deal indicated that Air Canada's board was evaluating its options to determine its next step. What is not evident is whether the Star Alliance carrier could step back from the acquisition, as the agreement included a Material Adverse Effect (MAE) clause that had exceptions including disease outbreaks. According to another source, the airline's Chief Financial Officer Michael Rousseau had said that it might be able to invoke the MAE clause if the COVID-19 pandemic disproportionately impacted Transat.
The transaction, which Air Canada hoped would bolster its leisure business, still requires the approval of Marc Garneau, Canadian Transport Minister. The Canadian Competition Bureau said in late March that the deal would probably result in a substantial reduction or prevention of competition in the sale of air travel and holiday packages. European Union antitrust regulators are scheduled to issue a decision by May 25.
