AC Raises TS Bid To $720 Million, Wins Support Of Biggest Shareholder
Air Canada has increased the purchase price for the acquisition of all issued and outstanding shares of Transat from $13 to $18 per share, raising the value of the all-cash transaction from $520 million to $720 million.
The significant boost in the offer won the support of Letko Brosseau & Associates Inc., the largest Transat shareholder with 19.3% of issued and outstanding shares.
The revised AC offer may deal a death blow to the efforts of Groupe Mach to acquire Transat. The Quebec-based real estate group recently submitted a $14 per share counter-offer – which was rejected by Transat management – and was attempting to secure enough commitments from shareholders to derail to the AC offer.
Transat says shareholders who have already deposited their TS shares with Mach can reverse this by using their broker to withdrawing their Transat shares.
Air Canada has entered into a “lock-up and support agreement” with Letko Brosseau, which had come out against AC’s original offer, calling the price too low. Under the terms of this new agreement, Letko Brosseau will vote all of the Class B voting shares of Transat it controls in favour of AC’s acquisition at the Special Meeting of Shareholders of Transat on 23AUG.
Amendments to the ‘Arrangement Agreement’ between Air Canada and Transat were unanimously approved by the Board of Directors of Transat and its Special Committee, and are included in an Amending Agreement that provides for the following:
an increase in the price payable by Air Canada from $13 to $18 per share, for 100% of all issued and outstanding Class A and Class B shares of Transat
an increase in the break fee payable by Transat from $15 million to $40 million in case of termination of the agreement in certain circumstances, including upon acceptance of a Superior Proposal that is not matched by Air Canada
a change to the definition of Superior Proposal under the Arrangement Agreement, from a third-party unsolicited bona fide written acquisition proposal, made at a firm price per share equal to or exceeding $14 to one that must be equal to or exceed $19 in cash
"After extensive consultations with Letko Brosseau and several other large shareholders of Transat, we agreed to materially increase our price to ensure the transaction receives the necessary level of support at the Special Meeting of Shareholders of Transat,” said Air Canada CEO Calin Rovinescu.
“We are therefore very pleased to have received Letko Brosseau's strong endorsement for our transaction. We know this achieves the best possible outcome for all stakeholders. For shareholders of Transat and Air Canada, the combination delivers excellent value, while also providing increased job security for both companies' employees through greater growth prospects. Air Canada intends to preserve the Transat and Air Transat brands and maintain the Transat head office and its key functions in Montreal," added Rovinescu.
"We are very pleased by the added stability brought about by Air Canada's increased bid as supported by Transat's largest shareholder, Letko Brosseau,” said Jean-Marc Eustache, President and Chief Executive Officer of Transat. “This fully funded cash transaction is the ideal platform for Transat's continued presence and growth in Montreal. We look forward to joining forces with a proven and successful player in our highly competitive and complex industry."