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Dec 15, 2020

Transat surges after airline says it rejected rival takeover bid

Transat accepts Air Canada's takeover bid

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Transat A.T. Inc. reconfirmed its board’s support for Air Canada’s acquisition proposal, which shareholders voted in favour of Tuesday, while disclosing it recently rebuffed a rival offer.

Transat said Tuesday morning it received only one alternative proposal, which came late last month from a private investor “not actively involved in the airline and tourism industries.”

While Transat said it allowed the suitor to conduct a legal and financial due diligence review, the offer put forth was not deemed superior to Air Canada’s $5-per-share proposal.

Under its agreement with Air Canada, Transat said it was allowed to consider an unsolicited acquisition proposal ahead of the shareholders’ vote.

The disclosure came just one hour before a virtual meeting was held where Transat shareholders voted in favour of Air Canada’s proposal, which was revised in October. The updated terms would see Air Canada pay $5 per share in cash or stock (based on a fixed price of $17.47 per Air Canada share) for Transat, compared to the $18 per share offer in its original takeover bid.

The deal still requires regulatory approval.

“We continue to believe that the combination with Air Canada presents the best avenue for Transat and its shareholders to weather the pandemic and benefit from an eventual recovery,” Desjardins analyst Benoit Poirier wrote in a note to clients ahead of the shareholder vote.

“Transat still trades at a significant discount of ~20 per cent to Air Canada’s share offer (0.2862 share of AC per TRZ share), reflecting the closing risk. We therefore believe the alternative offer is important in that it should provide some support for Transat shares if the transaction with Air Canada is not approved by regulators.”