The Battle For Transat Heats Up

Bruce Parkinson, Open Jaw

Quebec Premier and Transat co-founder Francois Legault.

The battle for the future of Transat is heating up, with yesterday’s news that Groupe Mach has made a $14 per share offer to buy the operator, $1 more than Air Canada’s $13 per share bid.

There’s a catch to the Groupe Mach bid, however, in that it would require $120 million in Quebec government financing – nearly one-quarter of the purchase price. Air Canada’s offer comes without financing conditions.

Air Canada’s exclusive agreement with Transat regarding a proposed transaction is subject to the completion of a 30-day due diligence period to be complete towards the end of June. 

Transat has agreed to pay Air Canada $15 million if it ends the agreement or accepts another bid.

Following the public release of Groupe Mach’s bid and a statement from Transat acknowledging the offer, Air Canada put out a press release touting the benefits of its offer.

“Air Canada's acquisition will result in job creation and economic growth in Quebec, given the travel and tourism opportunities. Moreover, Air Canada has all necessary funding to complete the transaction and therefore it is not subject to financing conditions and does not require government or taxpayer assistance,” the company said.

The statement went on to list what AC sees as reasons why it would make the best choice to take over Transat:

  • The airline maintains one of the largest global head offices in Quebec, with close to 10,000 of its 36,000 global employees based there. It has been named one of Montreal's top employers for each of the last six years and added 2,600 jobs there in the past five. 
  • Air Canada serves 11 airports across Quebec. The international reach of Air Canada's network makes Quebec a gateway to the world and is an important tool for economic development, including tourism.
  • Since 2012, Air Canada has launched 35 new routes from Montréal-Trudeau to global markets including Shanghai, Beijing, Tokyo, Tel Aviv, Lima, Sao Paulo, and Casablanca. This growth has allowed Montreal to rank amongst the top 50 most internationally connected cities in the world and to become one of the largest North American hubs.
  • Air Canada served more than 10 million passengers in Montreal in 2018.
  • Montréal-Trudeau Airport is a strategic hub for Air Canada connecting its Quebec and Atlantic Canada domestic network, with its U.S. transborder, Caribbean, European, North African, Asian and South American flights. To the U.S. alone, Air Canada connects Montreal-Trudeau to some 24 cities.

As the Globe and Mail reports, the government financing portion of the Groupe Mach bid didn’t necessarily find a warm reception.

Quebec Premier François Legault, who was one of the founders of Transat, says he is pleased there are two “Quebec offers” for the company and noted that Transat’s board and shareholders will decide the outcome. 

“We said at the beginning that we were concerned there would be an offer that came from outside Quebec and that we were ready to help a Quebec group to put in place an offer,” Legault said. 

“Now we have two Quebec groups. So I don’t think the government necessarily has to get involved. If there’s a good proposal and an attractive investment for Investissement Québec, they can look at that. But I don’t see the urgency here given we’re talking about two Quebec companies.”

The Groupe Mach offer is intriguing as it includes a 25% stake for Spain-based hotelier TM Grupo Inmobiliariofor an investment of $15 million in cash plus the “roll-over” its three operating hotels in Mexico with approximately 1,000 rooms. 

That would accelerate Transat’s diversification into hotel ownership, which the company has identified as a priority for some time but has been slow to execute.

Transat employs about 5,000 people and offers travel packages to 60 destinations in 25 countries in Europe and the Americas, according to its website. The company has annual revenue of almost $3 billion but has struggled to earn profits in recent years.

Bruce Parkinson

Bruce Parkinson Editor-in-Chief

An observer and analyst of the Canadian and international travel industries for over 25 years, Bruce uses the pre-dawn hours to prepare a daily news and information package to keep industry members up to date.

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