Coronavirus Crisis Triggers Investor Jitters Over Air Canada's Transat Buyout
Anna Kroupina, Open Jaw
Air Canada’s $720 million purchase of tour operator Transat is fuelling jitters among some investors who would like to see the deal renegotiated with the aviation industry in turmoil due to COVID-19, two sources familiar with the matter told Reuters.
“There is no way the deal should proceed as structured,” said Norman Levine, managing director of Portfolio Management Corporation.
“The whole world has changed in the airline/travel business and valuations from when the deal was announced to today bear no resemblance to each other."
The turmoil has also given Air Canada reasons to weigh its options.
“All options are on the table - the board is still deciding on what’s the best way forward,” one of the sources said.
Air Canada, like many of its global peers, has slashed flights, suspended financial forecasts and sought government aid as the industry deals with its worst slump.
Greg Taylor, a portfolio manager at Purpose Investments, said the airline “went into this with one of the better balance sheets in the airline industry, so any way they can save cash and not pay it out would be a positive.”
“I just don’t think they need any more capacity more than anything else.”
The sources declined to be identified as the discussions are confidential.
Neither company addressed the possible investor jitters directly.
In an email, Air Canada said its priority is “looking after our employees and our customers as well as implementing cost saving steps to conserve cash during the crisis.”
Transat said “any major change regarding the transaction that we would be aware of would be communicated promptly to the market.”
Air Canada secured Transat shareholders’ approval for the deal last year with a sweetened $18 a share bid. The transaction still requires approval of Canada’s Transport minister, Marc Garneau, though the nation’s competition regulator has voiced concern. European Union antitrust regulators are scheduled to decide on an agreement by May 25.
Anna Kroupina Journalist
Anna is OJ's newest member and she joins the team as a writer/reporter. She co-writes the daily news and covers events. Although she's new to the industry, pursuing a career path in travel/tourism has been a goal since her first family road trip to the Florida Keys sparked a desire to discover the world and this exhilarating, fast-paced industry.