News from the world – CA – Air Canada (TSX: AC): Acquisition could take place very soon


The Motley Fool Canada »Investing» Air Canada (TSX: AC): an acquisition could occur very soon

Christopher Liew, CFA | 20 October 2020 | Find out more: AC

Canada’s Main Airline Aimed To Become A Global Leader In Leisure, Tourism And Travel Distribution In May 2019, Air Canada (TSX: AC) announced its intention to acquire tour operator Transat AT, which operates rival airline Air Transat

Objections from industry regulators aside, COVID-19 nearly ruined the deal Airlines, including Air Canada, went into a spin The Canadian Competition Bureau warned that the proposed merger impede competition and lead to higher prices

However, border closures and falling travel demand were more pressing concerns than regulations At one point, Air Canada was considering pulling out after recording consecutive quarterly losses of $ 1 billion In October of this year, it looks like the deal will go through, and the acquisition could take place very soon

The plan was to merge the two companies but to keep the Transat brands By promoting two-way tourism, Canadian travelers will have more choice of destinations Air Canada CEO Calin Rovinescu plans to improve its capabilities in the highly competitive global leisure travel market

Air Canada increased its takeover bid to $ 720 million in August 2019, with a breakage fee of $ 40 if it decides to end the takeover bid Reports indicate that the company has entered into a lock-up and support agreement with Letko Brosseau, the main shareholder of Transat, which owns 193%

The latest news is that Air Canada is pursuing the deal Transat shareholders have agreed to a modified term that reduces the purchase price by 72% Instead of $ 720 million, the offer has fallen to 190 million dollars

The deal has been approved by Transat’s board of directors, but must have the approval of two-thirds of the shareholders The vote will take place in early December at a special meeting

Likewise, the renegotiated transaction requires regulatory approval from Canada’s Federal Cabinet and the European Commission antitrust body Expect the decision in Europe to come in early 2021.If all is in order, the deal is expected to close at the end of January or on February 15, 2021 at the latest

Under the terms of the new deal, Air Canada can monitor all of Transat’s finances and have a veto over lending activities With the takeover before the COVID-19 outbreak, Air Canada sought to control more 60% of transatlantic air travel from the country of origin

Potential revenue and cost synergies loom on the horizon, although news on the buyout has done little to support airline stock As of October 15, 2020, the stock price is of $ 15 52 or a cumulative loss of 68% Transat shares are doing less well with -70% to date in 2020

Peter Letko, co-founder of Letko Brosseau, said the offer to purchase was reasonable However, the company will not commit to the deal yet as a competing bidder could emerge Some analysts believe that a consolidation airlines is essential, given the slowdown in travel

The deal could be more easily passed with Canadian and European regulators For Air Canada, savings represent approximately $ 530 million Pricing reflects the impact of the pandemic on the airline industry and the assets of Unfortunately, the collapse is so severe that it will be years before capacity returns to pre-coronavirus levels

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Global News – CA – Air Canada (TSX: AC): Acquisition Could Happen Very Soon



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