The MACH maneuver
Transat A.T. has adopted a provision to protect it from hostile bids, (a poison pill). The process starts as soon as a shareholder holds 20% of the voting shares. To circumvent this measure, MACH offers to purchase up to 19.5% of the Class B voting shares. The offer is $ 14 per share and MACH will have to extend $ 97 million to achieve its objective.
Mach could stand together with Letko-Brosseau (19%) le Fonds de Solidarité (12%) and la Caisse (6%). The four shareholders would then hold 56.5% of the voting shares of Transat A.T. at the meeting of August 23rd. The maneuver of MACH is clever and has chances of success in the short term. Several small shareholders will likely want to take this opportunity to sell their shares at $ 14.
There is therefore a strong chance that MACH will win the Aug. 23 vote and defeat Air Canada. Unless she has forgotten to come to an agreement with the other three shareholders.
Air Canada will not let go Transat A.T without a good fight. If MACH succeeds in getting the $ 14 shares, Air Canada will go up to $ 15 and so on. Sooner or later, MACH will no longer be able to follow and Air Canada will win.
It is clear that the shareholders of Transat A.T. will win big at this game. For Letko-Brosseau, each increase of one dollar a share represents nearly $ 7 million more in his pockets. The logic of the business makes the three largest shareholders try to get more for their investment. For its part Air Canada tries to have the best possible price for its acquisition.
The bet is not very risky for MACH even if it buys 19.5% of the shares at a higher price. Once Air Canada wins, it will also make nearly $ 7 millions of profits for every estra dollar a share.
Air Canada must win the control or Transat, because ONEX is waiting on the other side of the door. Air Canada will eventually get hold of Transat, but it will not be a bargain like Aeroplan. It looks like someone as flared the good occasion.>>> Follow us on Facebook and Twitter