Groupe Mach's offer for 6.9 million Transat AT shares blocked by tribunal

Groupe Mach's offer for 6.9 million Transat AT shares blocked by tribunal

Air Canada says it will spend more to buy Transat A.T. Inc., upping its total offer by $200 million and winning the support of the tour company's largest shareholder.

Air Canada announced on August 11 that Transat shareholder Letko Brosseau and Associates backed the revised C$720 million deal, which raises the purchase price from C$13 to C$18 per share.

Critically, Air Canada locked up support from Letko Brosseau & Associates Inc., which owns about 19.3 per cent of Transat's voting shares. "But it happened after consultations with Transat's major stockholders, including Letko Brosseau, with whom we are now announcing a lockup agreement", Hennebelle said in a phone interview.

Transat called on authorities to bar the real estate company from scooping up a plurality of Transat shares in a bid to derail the pending acquisition by Canada's biggest airline.

Transat in June accepted Air Canada's earlier all-cash bid of $13 a share, over a $14 per share offer from Group Mach.

Transat shares were trading up 39% at C$16.41, while AC shares were down 1.2%.

Air Canada and Transat would together command roughly 60 per cent of the transatlantic market from Canada if the deal goes through.

Transat's airline primarily ferries passengers in packaged vacations.

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Transat shareholders are scheduled to vote on the Air Canada offer August 23 in Montreal.

"We view the take-out price is rather generous given Transat's volatile profitability profile", said analyst Mona Nazir of Laurentian Bank Securities in a note to investors. We know this achieves the best possible outcome for all stakeholders. The decision means the Montreal developer is not allowed to acquire any shares under its scheme and is expected to return promptly to shareholders any shares already deposited.

Air Canada has enough cash on hand to cover the extra $200 million.

Rovinescu also touted the deal's impact on Quebec as a whole, saying the province's economy "will derive maximum advantage of having a Montreal-based, growth-oriented global champion in aviation, the world's most worldwide business, spurring more employment and securing Montreal's position as a leader among world aviation centres". Air Canada agreed to maintain the Air Transat and Transat brands, as well as Transat's Montreal head office and key functions. "We look forward to joining forces with a proven and successful player in our highly competitive and complex industry" said Jean-Marc Eustache, President and Chief Executive Officer of Transat. He wouldn't say whether Mach will buy Transat shares, saying: "All options are on the table".

If Transat breaks off the Air Canada deal for a better offer, it agreed to pay a break fee of $40 million, up from $15 million.

"The deal is still not a foregone conclusion", he added. We are therefore very pleased to have received Letko Brosseau's strong endorsement for our transaction.

Buggé put it more bluntly: "If Transat shareholders vote in favour of that deal, they are going to have to wait for many, many months before they see any money". It requires approval from federal transportation and competition regulators.

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