The ins and outs of Transat A.T. acquisition

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The ins and outs of Transat A.T. acquisition 

Shareholder vote

On August 23, the shareholders of Transat A.T. will have to vote on the Air Canada offer. Although some major shareholders have expressed their dissatisfaction, all indications are that they will unhappily vote yes. This is the only one on the table and she is serious, refusing it would be a risky poker game.

For shareholders, it will be difficult to find an other buyer to bid higher than $ 13 per share. Transat A.T. does not generate profits at this time and it just began its investments in real estate. It will take years for it to generate sufficient profits to justify a purchase over $ 13. Unless the acquirer is another airline, a partial or full merger could then generate savings faster to justify its acquisition cost. But the majority shareholder will have to be Canadian, leaving only ONEX.

Therefore, a rejection of Air Canada’s offer on August 23 would suggest that something is going on behind the scenes. In any case, if ONEX were to increase the offer, Air Canada would follow.

The Competition Bureau

Air Canada’s biggest challenge in acquiring Transat A.T. is theBureau and the Commissionner of Competition ; this is where everything will be played out. If we consider only the Canadian market for transatlantic flights, the two companies grouped dominate outrageously. In order to successfully convince the Bureau, Air Canada will have to be keen.

The press release announcing the agreement between Air Canada and Transat AT announces how the acquisition will be presented to the Bureau and the Commissionner of Competition : “Air Canada intends to preserve the Transat and Air Transat brands, as well as Transat’s head office and the key functions of it “.

It is not clear what the Bureau’s requirements will be. But for this transaction to pass, Air Canada will have to leave a maximum of autonomy to the Air Transat division.

Why this acquisition

It is unlikely to be known whether Air Canada was aware of MACH’s offer when it approached Transat A.T. Nor will it be known whether it was aware of the negotiations between WestJet and ONEX. But if in business “timing is everything” the timing of Air Canada’s offer on Transat is exceptionally good.

Imagine, first it blocks the acquisition of Transat A.T. by MACH. Over the next two to three years, MACH could have sold 49% of Air Transat to a foreign airline. The other possible scenario would have been that after WestJet, ONEX would acquire Transat A.T. Definitely, Air Canada has just stroke an ace.

Regardless of the price, Transat A.T. will cause less trouble for Air Canada than if it passes into the hands of a competitor. The Bureau and the Commissionner of Competition can set its requirements, Air Canada will say yes to everything.

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