Air Canada, Transat revise takeover agreement, Transat adds $250m in cash

[dagger]

Transat release

 

https://www.newswire.ca/news-releases/transat-a-t-inc-announces-revised-acquisition-transaction-with-air-canada-859974025.html

 

MONTREAL, Oct. 10, 2020 /CNW Telbec/ - Transat A.T. Inc. ("Transat" or the "Corporation") announced today that it has revised its arrangement agreement with Air Canada to reflect current market and economic conditions and the devastating impact of the COVID-19 pandemic on the worldwide airline, travel and tourism industries. Under the terms of the binding agreement they have entered into, unanimously approved by the Board of Directors of Transat, Air Canada will acquire all issued and outstanding shares of Transat for $5.00 per share, payable at the holder's option either in cash or shares of Air Canada, or a combination thereof, to form a global Montreal-based combined company. The purchase price represents a premium of 31.6% over the 20-day volume weighted average price (VWAP) of Transat shares on October 8, 2020. Transat also announced today the implementation of a new $250 million short-term loan facility.

"With the volume now forecasted to be down 66% worldwide at the end of 2020, it is clear that the world has changed since the signing of the original agreement in June 2019," said Jean-Marc Eustache, President and Chief Executive Officer of Transat. "This is the worst crisis since the founding of Transat 33 years ago and with a second wave of the pandemic underway, the timing of an eventual recovery remains uncertain. More than ever, having a national airline with the scale to weather current industry turbulence, which is expected to continue for several years, is in the best interests of our shareholders, customers, employees and other stakeholders."

Given the uncertainty related to the COVID-19 pandemic, continuing restrictions on non-essential travel, and the impact to date of the pandemic-related interruption of operations on its cash position, Transat needed to put in place additional sources of financing. The terms of the original transaction restricted Transat's ability to do so without Air Canada's consent. As part of the negotiation leading to today's announcement, Transat has been able to implement a new $250 million short-term loan facility, as well as certain critical amendments to its existing senior loan facility providing Transat with additional flexibility in the context of the current business and economic environment. 

"Securing Air Canada's consent to put in place the new loan facility was critical in the decision to revisit the terms of the original agreement with Air Canada" said Jean-Yves Leblanc, Chair of the Special Committee of the Board of Directors of Transat overseeing the process leading to today's announcement. "Another key factor in Transat's decision was the likelihood of obtaining the necessary regulatory approvals before the fast arriving deadline of December 27, 2020, taking into account the significant and adverse impact of the pandemic on Air Canada's original motivations for completing the transaction at the price set initially. Consummating the initial deal at $18.00 was not an option that was viable given the full set of circumstances the Corporation is facing", continued Mr. Leblanc.

The process of obtaining the required regulatory approvals for the transaction under the original arrangement agreement has been significantly and adversely affected by the pandemic and its impact on the industry as a whole. With the passage of time, the concerns raised by regulatory agencies and the challenges posed by the post COVID-19 environment, the Board of Directors of the Corporation came to the conclusion that the transaction proposed under the original arrangement agreement was unlikely to obtain the required regulatory approvals prior to the ultimate outside date of December 27, 2020 and was therefore unlikely to be consummated.  "We believe that revised terms will provide the parties with greater incentives to address the concerns raised by regulatory agencies in order to obtain the regulatory approvals, including with respect to the offer of remedies which should provide a greater chance of obtaining the required approvals from regulatory authorities prior to the newly extended date of February 15, 2021," said Mr. Leblanc.

Based on the foregoing, Transat's Board of Directors determined that the revised transaction, with the implementation of the new financing, is the best prospect currently available for Transat's continued viability and the preservation of shareholder value relative to the alternatives available to it in the context of the original arrangement agreement, and therefore represents the best option for all Transat stakeholders, including shareholders, employees, creditors, suppliers, customers and partners.

The Transat Board of Directors, having received and considered the recommendation of its Special Committee of independent directors, and having considered all relevant factors including the terms of the original arrangement agreement and the status of the transaction contemplated thereby, has unanimously determined that the revised transaction is in the best interests of Transat and its stakeholders, approved the revised Arrangement Agreement and recommended that Transat shareholders vote in favour thereof. In addition, each of the directors of Transat has entered into a voting support agreement pursuant to which each of them has committed to vote in favour of the transaction.

Each of National Bank Financial and BMO Capital Markets has provided the Transat Board of Directors with an opinion to the effect that, as of the date thereof, the consideration to be received by holders of Transat shares with respect to the revised transaction was fair, from a financial point of view, to such holders, in each case subject to the respective limitations, qualifications, assumptions and other matters set forth in such opinions.

Additional Details about the Revised Transaction

The revised Arrangement Agreement terminates and replaces the original arrangement agreement between Transat and Air Canada dated June 27, 2019, as subsequently amended on August 11, 2019 pursuant to which Air Canada had previously agreed to acquire all issued and outstanding shares of Transat for a cash consideration of $18.00 per share.

Under the terms of the revised agreement, Transat shareholders will have the option to receive payment of the consideration in the form of cash or shares of Air Canada, or a combination of both. Air Canada shares issuable under the share payment election will be issued on the basis of a price of $17.47 per Air Canada share, translating into an exchange ratio of 0.2862 Air Canada share per Transat share. The price set for the Air Canada shares under the exchange ratio approximates the 30-day volume weighted average price (VWAP) of the Air Canada shares on September 23, 2020, the time the new cash consideration was in negotiation. Opting to receive shares of Air Canada provides upside opportunity by offering Transat shareholders the ability to participate in the potential long-term value created by Air Canada, and in the airline industry generally, in a post-Covid recovery environment, as well as sharing in the expected synergies resulting from the combination of the two companies.

The transaction will be subject to shareholder approval, including approval by at least two thirds of the votes cast by shareholders present in person or by proxy at the special meeting that will be called to approve the transaction in early December.

The transaction also remains subject to regulatory approvals, particularly those of authorities in Canada and the European Union. To this end, the parties are collaborating to provide information and make submissions to the regulatory authorities with the objective of securing the requisite approvals before February 15, 2021, which has been set as the outside date for the closing of the transaction. Based on information currently available, the European Commission's decision is now expected early 2021. The Government of Canada has not indicated when it would render its decision.

The terms of the revised Arrangement Agreement provide for a break fee of $10 million, payable by Transat in case of termination of the agreement in certain circumstances, including upon acceptance of a Superior Proposal that is not matched by Air Canada. Under the revised Arrangement Agreement, a Superior Proposal is defined, in part, as an unsolicited bona fide written acquisition proposal, that is made at a firm price per share equal to or exceeding $6.00 in cash, that has fully committed financing from a financial institution or similar organization (or is made by a person with adequate cash on hand), and that the Board of Directors of Transat determines in its good faith judgment, after receiving legal and financial advice, would result in a transaction that would be in the best interests of Transat and its stakeholders and be more favourable, from a financial point of view, to Transat shareholders. The terms and conditions for the making of a Superior Proposal and its complete definition are contained in the revised Arrangement Agreement. Furthermore, a break fee of $30 million would be payable by Transat if the agreement is terminated by Air Canada following a change in recommendation by the Board of Transat, which change would have been based on a governmental financial assistance program that is material to Transat becoming generally available to the Canadian airline industry or the segments of the travel, hotel and tourism industries in which the Corporation operates.

The revised Arrangement Agreement also provides for the payment by Air Canada of a reverse break fee of a maximum of $30 million in the event that the agreement is terminated because regulatory or governmental approvals are not obtained, subject to certain conditions.

Finally, the revised Arrangement Agreement contains a new closing condition that Transat's level of net indebtedness on closing not exceed a certain specified threshold.

In addition to shareholder and regulatory approvals, the transaction remains subject to court approval and other closing conditions usual in this type of transaction, and compliance with the revised covenants contained in the revised Arrangement Agreement (including with respect to the new requirement on Transat's level of net indebtedness on closing described above), all of which must be obtained or satisfied no later than February 15, 2021. If such approvals are obtained and conditions are met, the transaction is expected to be completed in late-January or early February 2021.

Further details regarding the terms of the transaction are set out in the revised Arrangement Agreement. The transaction will proceed by way of a court-approved plan of arrangement pursuant to the Canada Business Corporations Act. Additional information regarding the terms of the revised Arrangement Agreement and the background of the transaction will be provided in the information circular for the special meeting of Transat shareholders to be held in early December. Copies of both the revised Arrangement Agreement and the information circular will be made available on SEDAR at www.sedar.com.

Transat has retained National Bank Financial as financial advisor and Fasken as legal advisor. BMO Capital Markets and Norton Rose Fulbright are acting respectively as financial and legal advisors to the Special Committee of Transat's Board of Directors.

New Loan Facility

In connection with the revised Arrangement Agreement, Transat will immediately implement newly secured $250 million short-term loan facility with National Bank of Canada as lead arranger. Given the uncertainty related to the COVID-19 pandemic and continuing restrictions on non-essential travel, together with the uncertainty surrounding the obtaining of required approvals from regulatory authorities, securing this new financing is a necessary, prudent decision and in line with similar actions taken by nearly all airlines around the world.

The new loan facility can be drawn in tranches at any time before February 28, 2021, subject to meeting relevant conditions precedent and borrowing conditions. Conditions include certain requirements regarding freely available cash before and after drawing on the facility. The new loan facility will terminate on the earlier of March 31, 2021 and the closing of the arrangement with Air Canada.

As part of the implementation of the revised Arrangement Agreement and the new loan facility, Transat has also been able to implement certain amendments to its existing senior loan facility that will provide it with greater flexibility in the context of the current business and economic environment, including the temporary waiver of certain financial ratios. Revised terms also include the introduction of a minimum unrestricted cash level requirement and restrictions on the ability to incur additional debt.

 

[dagger]

Air Canada release

 

https://www.newswire.ca/news-releases/air-canada-and-transat-a-t-inc-conclude-amended-transaction-for-combination-of-the-two-companies-872396338.html

 

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• Reduced $5.00 purchase price reflects post-COVID-19 reduction in airline values
• Air Canada approves $250 million of increased borrowings by Transat pending transaction completion
• Transat Board of Directors unanimously approves amended transaction and recommends shareholder approval

MONTREAL, Oct. 10, 2020 /CNW Telbec/ - Air Canada announced today that it has concluded an amended transaction with Transat A.T. Inc. that provides for Air Canada to acquire all the issued and outstanding shares of Transat and for its combination with Air Canada. Under the binding agreement, unanimously approved by the Board of Directors of Transat, Air Canada will acquire all shares of Transat for $5.00 per share, payable at the option of Transat shareholders in cash or shares of Air Canada at a fixed exchange ratio of 0.2862 Air Canada share for each Transat share (representing a price for the Air Canada shares of $17.47). The value of the transaction is approximately $190 million.

The amended transaction reflects the unprecedented impact of COVID-19 upon the global air transport industry, which has endured a severe decline in air travel since the initial Arrangement Agreement between Air Canada and Transat was concluded and approved by Transat shareholders in August 2019. The transaction remains subject to shareholder approval, court approval, the approval of the Toronto Stock Exchange, certain customary and other conditions, and regulatory approvals including the ongoing approval process of regulatory authorities in Canada and the European Union. If such approvals are obtained and conditions are met, the transaction is expected to be completed in late January or early February 2021.

"COVID-19 has had a devastating effect on the global airline industry, with a material impact on the value of airlines and aviation assets. Nonetheless, Air Canada intends to complete its acquisition of Transat, at a reduced price and on modified terms," said Calin Rovinescu, President and Chief Executive Officer of Air Canada.  "This combination will provide stability for Transat's operations and its stakeholders and will position Air Canada, and indeed the Canadian aviation industry, to emerge more strongly as we enter the post-COVID-19 world."

The Transat Board of Directors has unanimously determined that the amended transaction is in the best interests of Transat and its stakeholders, and is recommending that Transat shareholders vote in favour of the transaction. In addition, each of the directors of Transat has entered into a voting support agreement pursuant to which each of them has committed to vote in favour of the transaction. Each of National Bank Financial and BMO Capital Markets has provided the Transat Board of Directors with an opinion to the effect that, as of the date thereof, the consideration to be received by holders of Transat shares with respect to the transaction was fair, from a financial point of view, to such holders, in each case subject to the respective limitations, qualifications, assumptions and other matters set forth in such opinions.

The transaction will be implemented pursuant to a court-approved plan of arrangement under the Canada Business Corporations Act. The new price of $5.00 per share represents a premium of 31.6% over the 20-day volume weighted average price (VWAP) of Transat shares on October 8, 2020.

All dollar amounts in this news release are in Canadian currency.

[anonymous]

One wonders if/how much Liberal meddling was involved in this...

[Guest]

5 minutes ago, anonymous said:

One wonders if/how much Liberal meddling was involved in this...

If they did meddle ,  then good .  Our industry needs all the help it can get with the hope of reaching some stability in the times of a pandemic.

[dagger]

I am reasonably confident that the Liberal government - or any federal government under the circumstances - would want the shareholders of the airlines to bear the brunt of the storm for as long as possible. Bailing out companies early on, after several fat years prior to the pandemic (as the US has done) would have been deeply unpopular. It would not have wanted to bail out, AC, for example, in a manner that would have enabled TA to resist getting a big haircut on the acquisition by AC.

The optics are improving now that airlines have parked a lot of planes, laid off employees, and in the case of the big airlines, seen shareholders' investments shrink. Onex has written down WS to zero, AC's share price is about a third of its pre-pandemic peak, and Transat's share price has been similarly clobbered and the takeover price revised downward by 75%. In short, these airlines are no longer fat cats. Air Canada has lined up credit it will need years to pay down after business starts returning to normal. I'd be surprised if WS wasn't in the same boat - it will either owe Onex or financial institutions for the lifelines it needs to stay afloat and get back to profitability. 

I've also been of the view that government helping the airlines would need to allow for the different ownership structures given factors like the different size, international exposure, and in the case of AC, the need for it to save TA so the government doesn't have to do it. Also, there is the not insignificant issue of AC as one of the largest buyers of the Montreal-built A220. (Westjet really should have bought the A220 and scrapped the 736, but that's another matter altogether).

[rudder]

The maestro never loses his touch...... 

With the stock swap option, this will be a virtually ‘free’ acquisition.

Now to see what the business plan will be for 2021-2024.

[Turbofan]

Well we now know they were negotiating after all.

[Turbofan]

2 hours ago, dagger said:

Onex has written down WS to zero,

That is what KKR did with their purchase of Aveos isn’t it? We know how that went.  KKR left the mess to the banks. 
 

Where did you read that?

[Guest]

Goto listing of aircraft shown as owned by Air Transat.  Are they owned or leased?

https://wwwapps.tc.gc.ca/saf-sec-sur/2/ccarcs-riacc/RchSimpRes.aspx?cn=||&mn=||&sn=||&on=AIR+TRANSAT+A+T+INC.|&m=||

[moeman]

1 hour ago, Turbofan said:

That is what KKR did with their purchase of Aveos isn’t it? We know how that went.  KKR left the mess to the banks. 
 

Where did you read that?

https://www.theglobeandmail.com/business/article-onex-posts-11-billion-loss-writes-down-westjet-stake/

 

 

[moeman]

28 minutes ago, Malcolm said:

Goto listing of aircraft shown as owned by Air Transat.  Are they owned or leased?

https://wwwapps.tc.gc.ca/saf-sec-sur/2/ccarcs-riacc/RchSimpRes.aspx?cn=||&mn=||&sn=||&on=AIR+TRANSAT+A+T+INC.|&m=||

All but a few have the "lsd" designation next to them according to this site.

https://www.planespotters.net/airline/Air-Transat

[rudder]

43 minutes ago, Malcolm said:

Goto listing of aircraft shown as owned by Air Transat.  Are they owned or leased?

Go to the Transat MD&A.

All Leased.

[Turbofan]

2 hours ago, moeman said:

https://www.theglobeandmail.com/business/article-onex-posts-11-billion-loss-writes-down-westjet-stake/

 

 

Thanks moeman.  That article is months old and doesn’t reflect Onex writing WJ down to zero.  I thought there might have been something more recent that I missed.

 

Onex said the decrease in value of its investments ranged from declines of between 1 per cent and 77 per cent.

[Guest]

3 hours ago, rudder said:

Go to the Transat MD&A.

All Leased.

So then, what does AC get for their Money?  Personnel of course but what else ?

[Airband]

1 hour ago, Turbofan said:

That article is months old and doesn’t reflect Onex writing WJ down to zero.  I thought there might have been something more recent that I missed.

Onex said the decrease in value of its investments ranged from declines of between 1 per cent and 77 per cent.

The area within Onex where WestJet assets are held (Onex Partners V)  was written down $111M in Q1/20 and primarily attributed to reduced value of WestJet. There was further reduction of asset value in Partners Fund V of $60M in Q2/20 but no comment as to the components contributing to the loss.

[Airband]

Quote

'Airline passengers often clap for pilots who stick a smooth landing at the end of a turbulence-plagued flight. If he can close the Transat takeover and keep Air Canada flying smoothly through the pandemic, Mr. Rovinescu deserves the same tribute.'

 

How Air Canada’s CEO is using a common-sense hardball strategy to land the Transat deal at a bargain price

Tue Oct 13, 2020 - The Globe and Mail
by Andrew Willis

Calin Rovinescu is doing everything he can to steer clear of catastrophe as the lawyer-turned-chief-executive leads the airline through the COVID-19 crisis. Saturday’s announcement of Air Canada’s reworked takeover of Transat AT Inc. – an offer cut to $190-million from a prepandemic $720-million – is the latest example of Mr. Rovinescu’s deal-making skills, and willingness to use hardball tactics.

Air Canada is poised to close a takeover at a time when many deals stuck before the pandemic are falling apart acrimoniously – witness the lawsuits launched between theatre chains Cineplex Inc. and Cineworld Group PLC over their failed $2.8-billion marriage. Mr. Rovinescu’s common-sense strategy is to pick off a rival and become the market leader on transatlantic and vacation routes. He can now reach that goal while spending far less money.

Mr. Rovinescu took advantage of Transat’s need for cash to strike a sweeter deal, tapping negotiating skills honed during three deal-filled decades as a lawyer at Stikeman Elliott and banker at investment dealer Genuity Capital Markets. The 65-year-old CEO is in his second stint as an Air Canada executive, first working at the airline for four years starting in 2000, then coming back as CEO in 2009.

On Saturday, Montreal-based Transat explained that the original takeover agreement, struck back in the summer of 2019, restricted the company’s ability to borrow more money without Air Canada’s consent. With the pandemic now keeping passengers off planes, Transat lost $140-million on revenues of just $9.5-million in the most recent quarter, which ended July 31. In September, the company said it was in “advanced discussions” on new loans.

To remain in business, Transat announced on the weekend that it received Air Canada’s permission to borrow an additional $250-million on a short-term credit facility. The company also amended covenants on its long-term debt.

In return for allowing this extra debt, Air Canada received the Transat board’s blessing for cutting its Transat offer to $5 a share, from the original price of $18. Jean-Yves Leblanc, chair of the Transat board committee overseeing the sale, said Saturday in a press release: “Securing Air Canada’s consent to put in place the new loan facility was critical in the decision to revisit the terms of the original agreement.”

The Transat acquisition is one element of an Air Canada restructuring that’s played out before and during the pandemic. On Mr. Rovinescu’s watch, the company has struck long-term deals with its unions, reversing an adversarial relationship that dominated his first stint at Air Canada, 15 years ago.

Since the pandemic hit, Air Canada has built up $6-billion of liquidity by refinancing much of its fleet, retiring aging planes, selling stock and bolstering its credit lines. This month, the airline announced it plans to buy 25,000 COVID-19 rapid-response test kits from drug maker Abbott.

“Having achieved a groundbreaking labour deal that gave management the tools and flexibility to completely restructure operations, Air Canada remains in the early stages of executing on this transformation,” analyst Walter Spracklin at RBC Dominion Securities Inc. said in a report published prior to the announcement of the revised Transat transaction.

In a line that proved prescient, Mr. Spracklin said: “We believe the deal will likely be renegotiated at a lower price, and see any cash savings from the potentially amended transaction as a positive for the shares.”

Air Canada still needs regulators and Transat shareholders to sign off on the revised offer. Fund manager Letko Brosseau & Associates Inc. fought hard to get the original $18 bid and was unavailable for comment on the new terms during the weekend. If approved, the transaction is expected to close by February.

For his part, Mr. Rovinescu is looking past both this deal and the pandemic to clear skies. In a press release on Saturday, Air Canada’s CEO said: “This combination will provide stability for Transat’s operations and its stakeholders and will position Air Canada, and indeed the Canadian aviation industry, to emerge more strongly as we enter the post-COVID-19 world.”

Airline passengers often clap for pilots who stick a smooth landing at the end of a turbulence-plagued flight. If he can close the Transat takeover and keep Air Canada flying smoothly through the pandemic, Mr. Rovinescu deserves the same tribute.

 

 

[Guest]

Employers rankings - Transat is the world's 57th best employer and 5th in Canada 

the Ranking is in Travel and Leisure  https://www.forbes.com/lists/worlds-best-employers/#6e0d56f21e0c

 

Amongst airlines AC ranks 93rd  WestJet did not make any of the lists.

 

Rank	Name	Industries	Country/Territory
25	Deutsche Lufthansa	Transportation and Logistics	Germany
27	Southwest Airlines	Transportation and Logistics	United States
39	Emirates	Transportation and Logistics	United Arab Emirates
45	Delta Air Lines	Transportation and Logistics	United States
58	FedEx	Transportation and Logistics	United States
85	American Airlines Group	Transportation and Logistics	United States
93	Air Canada	Transportation and Logistics	Canada

[Guest]

European Commission delays decision on Air Canada purchase of Transat until January

8 November 2020Canadian Aviation News

Link to Story Source: The Star

By The Canadian Press Fri., Nov. 6, 2020

 

MONTREAL – European regulatory authorities are delaying their decision on approving the proposed purchase of Transat A.T. by Air Canada until early next year.

The European Commission says it will decide by Jan. 8 instead of its previous deadline of Dec. 11.

In addition to a sharp downward revision of the value to $190 million from $720 million, the deadline for the sale initially set for Dec. 27 was postponed to Feb. 15.

Canada’s largest airline is now offering $5 for each share of the Quebec tour operator, compared with $18 previously. This proposal will be the subject of another vote and must obtain the support of at least two-thirds of the holders of Transat A. T. securities at a meeting scheduled for Dec. 15.

European regulators had decided to take a deeper look into the deal after raising concerns that the combination could lead to higher prices and lower supply.

The European Commission’s preliminary analysis notably pointed out that competition could diminish on 33 routes between Canada and Europe if Air Canada acquires Transat.

In March, the Competition Bureau of Canada also had a negative reception to the transaction, but its analysis was conducted before the outbreak of the pandemic.

The federal government has yet to give its blessing to the takeover.

This report by The Canadian Press was first published Nov. 6, 2020.

 

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[Guest]

Transat A.T. Inc. Announces the Mailing of its Circular in Connection with the Special Meeting of Shareholders to Approve the Plan of Arrangement with Air Canada

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NEWS PROVIDED BY

Transat A.T. Inc. 

Nov 14, 2020, 12:01 ET

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MONTREAL, Nov. 14, 2020 /CNW Telbec/ - Transat A.T. Inc. ("Transat" or the "Corporation"), announces the mailing to its shareholders of its management proxy solicitation circular (the "Circular") and related proxy materials in connection with the special meeting of shareholders to be held at 10:00 a.m. on December 15, 2020 in a virtual only format at https://web.lumiagm.com/481453964, in accordance with the terms of an interim order of the Québec Superior Court obtained on November 10, 2020. A copy of the Circular has been filed with Canadian securities regulatory authorities and may be found under the Corporation's profile on SEDAR at www.sedar.com and on Transat's website.

The purpose of the meeting is to obtain shareholder approval of the plan of arrangement with Air Canada pursuant to the arrangement agreement entered into between the Corporation and Air Canada on October 9, 2020 and announced on October 10, 2020. A copy of the arrangement agreement has been filed with Canadian securities regulatory authorities and may be found under the Corporation's profile on SEDAR at www.sedar.com.

The Circular contains important information regarding the revised arrangement agreement with Air Canada for the acquisition of all the issued and outstanding shares of Transat at a price of $5.00 per share, payable at the holder's option either in cash or shares of Air Canada (which will be issued based on a reference price of $17.47 for each Air Canada share), or a combination thereof (the "Transaction"). The Circular also explains how shareholders can vote at the meeting, the background that led to the Transaction, and the reasons that led the special committee of the board of directors as well as the board of directors to unanimously determine that the Transaction is in the best interests of Transat and its stakeholders, approve the arrangement agreement and recommend that Transat shareholders vote in favour of the Transaction.

Shareholders of record at the close of business on November 10, 2020 will be entitled to vote at the meeting in accordance with the voting rights corresponding to their shares.

In addition, shareholders wishing to receive the share consideration (i.e. 0.2862 voting shares of Air Canada for each voting share of the Corporation), must return the Letter of Transmittal and Election Form, attached to the Circular, to AST Trust Company (Canada), acting as the depositary, by 5:00 p.m. (Montréal time) on or before the date that is two business days prior to the date of completion of the Transaction (the "Election Deadline").

Transat will include notice of the Election Deadline in a press release disseminated over newswire service in Canada at the latest on the business day immediately before the Election Deadline. Investors who purchase shares of the Corporation shortly before the completion of the Transaction are advised that they may not have sufficient time in order to submit a duly completed Letter of Transmittal and Election Form by the Election Deadline in respect of such shares and should consult with their broker, trust company or other intermediary and seek advice from their professional advisers in advance of any such trades.

The Corporation has retained Kingsdale Advisors to act as proxy solicitation agent and to answer information requests from shareholders with regard to shareholder approval of the plan of arrangement with Air Canada. Communications with Kingsdale Advisors may be made (i) by e-mail at contactus@kingsdaleadvisors.com or (ii) by phone at toll-free at 1-888-518-1552 or collect call outside North America at 1-416-867-2272.

[rudder]

https://www.reuters.com/article/idUSKBN2860ZT

 

Air Canada has offered concessions related to its proposed acquisition of Canadian tour operator Transat to address EU antitrust concerns, a European Commission filing showed on Thursday.

The Commission, which oversees competition policy in the 27-nation European Union, said the commitments had been submitted on Nov. 25. As a result it, it has extended the deadline for its decision by three weeks to Jan. 29.

 

 

[Airband]

Federal cabinet will rule on Air Canada and Air Transat merger in January

Quote

“WestJet believes that Air Canada should be required to maintain all three brands – Air Canada, Rouge and Transat. Air Canada should also be expressly precluded from using its Aeroplan loyalty program with its Transat-branded flights,”

Tue Dec 29, 2020 - The Globe and Mail
Robert Fife-Ottawa Bureau Chief

The federal cabinet is expected to decide in early January whether to approve Air Canada’s (AC-T) $180-million purchase of smaller rival Air Transat amid concerns the proposed merger would stifle competition and result in higher prices for travellers.

Transport Minister Marc Garneau has been coy about the public interest review that his department has been undertaking after the Competition Bureau warned the deal would be bad for consumers.

After Transat AT Inc. shareholders approved a revised purchase offer from Air Canada in mid-December, however, Mr. Garneau said he was “approaching the decision-making point.”

“I can’t give you a date but we are getting close to it,” he told reporters on Dec. 18.

A source told The Globe and Mail that Mr. Garneau is expected to soon forward a recommendation to cabinet and a decision should be announced early in the new year. The Globe is not identifying the source because they were not authorized to talk about the federal review.

Amy Butcher, the minister’s communications director, would only say that the internal review is still under way and that the department cannot discuss the merger because of “legal and financial considerations.”

Air Canada had originally offered $720-million in August to take over Transat in a merger that would give the country’s largest airline 60 per cent of transatlantic travel from Canada and 45 per cent of passenger capacity to sun destinations.

In October, Air Canada slashed its offer by almost 75 per cent to $180-million after airline revenues cratered as a result of the collapse in air travel due to COVID-19.

The federal Competition Bureau warned Mr. Garneau in March – based on prepandemic data – that the merger “is likely to result in substantial anti‑competitive effects through the elimination of rivalry between Air Canada and Transat in the areas of overlap between their networks.”

The watchdog found 83 routes between Canada and Europe, Florida, Mexico, the Caribbean and Central and South America where competition would be reduced or eliminated. This would lead to higher prices and fewer services and would particularly impact Montreal, Quebec City and Toronto, where the two airlines hold dominant market share.

In a confidential letter to Mr. Garneau on May 14, WestJet president and chief executive officer Ed Sims urged the federal government to impose conditions if the merger is approved.

Mr. Sims said Air Canada should give up some of its “peak period” slots at Pearson International and London’s Heathrow airports. Under the proposed deal, he said the merged airlines would acquire even more “peak period” slots between Toronto and London, foreclosing “meaningful competition” in two of the most important hubs for Canadian travellers.

He proposed other conditions as well to ensure competition.

“WestJet believes that Air Canada should be required to maintain all three brands – Air Canada, Rouge and Transat. Air Canada should also be expressly precluded from using its Aeroplan loyalty program with its Transat-branded flights,” Mr. Sims wrote in a letter obtained by The Globe.

“Air Canada should also not be permitted to use its dominant position to tie up hotels in the sun region through the use of exclusive contracts or incentives that effectively create exclusivity,” he added.

The European Union’s antitrust regulators are also reviewing the deal and have expressed concerns that it may significantly reduce competition and result in higher prices on 33 routes between Europe and Canada.

In June, 2019, Mr. Garneau ignored the advice of the Competition Bureau and allowed the merger of Canadian North and First Air. The bureau had said the deal would lead to “a substantial lessening of competition in the provision of passenger travel and cargo service on a number of routes in Nunavut and the Northwest Territories, including reductions in passenger and cargo capacity, increases in price, and reductions in flight schedules.”

However, the minister included conditions on the merger such as no price hikes to passengers and cargo delivery and no reductions to the weekly schedule on all routes of the airlines’ combined network.

Mr. Garneau also required the merged airline to provide his department with quarterly financial updates and yearly financial statements.

[Guest]

Péladeau urges Ottawa to reject Air Canada takeover of Air Transat

11 January 2021Canadian Aviation News

From The Globe and Mail – link to source story

ROBERT FIFE, OTTAWA BUREAU CHIEF
ERIC ATKINS, TRANSPORTATION REPORTER OTTAWA
JANUARY 10, 2021

Air Transat planes at Pearson airport in Toronto on Sept. 10, 2020.CHRISTOPHER KATSAROV/THE GLOBE AND MAIL

Quebec media baron Pierre-Karl Péladeau is urging the federal cabinet to deny Air Canada’s proposed takeover of Air Transat, offering to pay more for the struggling airline to guarantee competition and fairer prices for Canadian travellers.

The Globe and Mail has obtained three letters from Mr. Péladeau to Transport Minister Marc Garneau calling for a rejection of the merger, saying he will pay $6 a share or 20 per cent more than Air Canada to purchase Transat AT Inc., a Montreal-based airline and tour company.

Mr. Péladeau’s offer of $223-million for Transat does not involve Quebecor Media Inc., which controls his media empire and telecom holdings, but is through his private investment firm Gestion MTRHP Inc. He said he has the backing of an unnamed major financial institution.

The federal cabinet is expected to soon decide whether to approve Air Canada’s $180-million purchase of Air Transat amid concerns the proposed merger would stifle competition and result in higher prices for travellers.

“It is time to make known your rejection of this transaction and allow us to acquire Transat, thereby maintaining an essential choice that benefits Canadian travellers,” Mr. Péladeau wrote in a letter dated Dec. 10.

In another letter dated Dec. 31, Mr. Péladeau said Transat’s board of directors declined his offer in a terse e-mail sent to him on Dec. 14, the night before Transat shareholders approved the arrangement with Air Canada.

He said the refusal showed “contempt” for Transat shareholders and those who rely on healthy competition in the airline industry.

Transat on Dec. 15 acknowledged its board had received a competing proposal in November and held negotiations with the unnamed “private investor,” widely believed to be Mr. Péladeau. Transat said it determined the offer was not superior to Air Canada’s and did not put it to shareholders for a vote.

Ninety-one per cent of shareholders who voted backed the Air Canada deal.

“While we considered Air Canada’s offer imperfect, it was the only offer on the table,” said Patrick McQuilken, a spokesman for the Fonds de solidarité FTQ, which is Transat’s second-biggest owner with 12 per cent of the shares. “It wasn’t an ideal situation. There should have been more transparency.”

A spokesman for Transat declined to comment, and would not confirm or deny Mr. Péladeau was the unnamed bidder.

Mr. Péladeau told the Transport Minister that he submitted another bid to Transat on Dec. 22 that would remain open for 24 hours after any federal cabinet decision to turn down the Air Canada purchase on grounds the merger would stifle competition.

“It appears obvious that our proposal constitutes the alternative that can settle this issue in the best interest of Transat, of its shareholders, of its employees, and of Canadian and Quebeckers, and should be taken into account in our analysis of the file,” he wrote.

Mr. Garneau’s office had no comment on the letters because the department is still conducting a public interest review of the proposed merger after the Competition Bureau warned the deal would be bad for consumers.

A source told The Globe and Mail that Mr. Garneau is expected to soon forward a recommendation to cabinet and a decision could be announced in January or early February. The Globe is not identifying the source because they were not authorized to talk about the federal review.

Mr. Péladeau warned there is every possibility European Union anti-trust regulators will not approve the Air Canada deal since they have expressed concerns that it may significantly reduce competition and result in higher prices on 33 routes between Europe and Canada.

On Dec. 6, the Quebec business leader said he was interviewed for 90 minutes by EU regulators where he outlined his anti-competitive objections to the takeover.

The European Commission, which oversees competition policy in the 27-country European Union, opened an investigation in May on concerns that the deal could push up prices and reduce choice for flights between Europe and Canada.

The federal Competition Bureau warned Mr. Garneau in March – based on prepandemic data – that the merger “is likely to result in substantial anti‑competitive effects through the elimination of rivalry between Air Canada and Transat in the areas of overlap between their networks.”

The watchdog found 83 routes between Canada and Europe, Florida, Mexico, the Caribbean and Central and South America where competition would be reduced or eliminated. This would lead to higher prices and fewer services and would particularly affect Montreal, Quebec City and Toronto, where the two airlines hold dominant market share.

Mr. Péladeau alleged that Air Canada delayed providing information to EU regulators and requested postponement on its ruling to drive down the purchase price.

Peter Fitzpatrick, an Air Canada spokesman, said this is not true. The airline has been eager to close the deal, given the benefits it offers to employees and investors of both companies, and the communities they serve, he said.

Air Canada had originally offered $720-million in August, 2019, to take over Transat in a merger that would give the country’s largest airline 60 per cent of transatlantic travel from Canada and 45 per cent of passenger capacity to sun destinations.

In October, Air Canada slashed its offer by almost 75 per cent to $180-million after airline revenues cratered as a result of the collapse in air travel owing to COVID-19.

In a letter to Mr. Garneau dated Nov. 23, Mr. Péladeau said his companies, including internet and mobile service provider Videotron, as well as his newspapers and TV network, TVA, have provided competition that have benefited Quebeckers.

He promised to respect any conditions Ottawa sets down as part of an expected airline bailout.

“We anticipate, as management of airline companies have indicated, that the government of Canada will soon provide financial assistance to the industry subject to certain conditions,” he wrote. “The refunding of airline customers for unused airplane tickets would be one of the most important, as well as one that would see the government of Canada become a partner (as shareholder or other) in return for this financial assistance.”

In a confidential letter to Mr. Garneau on May 14, WestJet president and chief executive officer Ed Sims urged Ottawa to impose conditions if it approves Air Canada takeover of small rival Transat.

Mr. Sims said Air Canada should give up some of its “peak period” slots at Toronto’s Pearson International and London’s Heathrow airports. He proposed other conditions as well to ensure competition.

“WestJet believes that Air Canada should be required to maintain all three brands – Air Canada, Rouge and Transat. Air Canada should also be expressly precluded from using its Aeroplan loyalty program with its Transat-branded flights,” Mr. Sims wrote. “Air Canada should also not be permitted to use its dominant position to tie up hotels in the sun region through the use of exclusive contracts or incentives that effectively create exclusivity.”

With a report from Campbell Clark in Ottawa

[Guest1]

WestJet urges Ottawa to reject Air Canada’s takeover of Transat or impose conditions

19 January 2021Canadian Aviation News

From The Globe and Mail – link to source story

Eric Atkins, Transportation Reporter & Andrew Willis | January 19, 2021

Air Transat and WestJet craft near the gates at Toronto Pearson International Airport’s Terminal 3 on Mar. 19, 2020. Fred Lum/The Globe and Mail

WestJet Airlines Ltd. has urged the federal government to reject Air Canada’s AC-T takeover of Transat AT Inc. TRZ-T or impose conditions that would limit the combined companies’ market dominance.

The industry devastation caused by the pandemic must not be used as an excuse to allow Canada’s biggest airline to buy its third-biggest, WestJet said in a Jan. 3 submission to then-transport minister Marc Garneau.

“A fundamental element of Canada’s national transportation policy is to have at least two strong national airlines,” WestJet said in a summary of the document, a copy of which was obtained by The Globe and Mail. “WestJet’s ability to contribute to the Alberta economy and more broadly to the Canadian economy is imperilled by the proposed transaction.”

The federal cabinet is expected to make a decision on the $180-million takeover in the coming days or weeks, after reviewing submissions from such parties as WestJet, Transport Canada and the Competition Bureau, which has criticized the takeover as bad for consumer choice. The European Commission is also expected to make a ruling by Feb. 9.

On Feb. 15, the deal falls apart unless both companies agree to extend the date.

“For 25 years, WestJet has always stood for fair and transparent competition. For this reason we do not believe the proposed transaction should proceed unless the government imposes critical mitigation measures,” said Ed Sims, WestJet’s chief executive officer, in a statement to The Globe.

“An approval without significant remedies would provide Air Canada with an unprecedented government-sanctioned monopoly to the unavoidable detriment of the travelling public through higher air fares and lower service.”

As a condition of approving a deal, WestJet asked the federal government in its submission to prevent Air Canada from offering its Aeroplan loyalty program to Transat passengers, a request that Montreal-based Air Canada is likely to contest.

WestJet claims letting Air Canada extend loyalty rewards to Transat clients would “lock up otherwise contestable customers” and preserve the combined carrier’s near-monopoly on key international routes, including flights from Canada to Europe. Air Canada paid $495-million to acquire Aeroplan in 2019 and the program has more than five million members.

WestJet is also demanding the government require the combined airlines to give up airport slots, to help offset their market dominance. WestJet singled out London’s Heathrow, Amsterdam’s Schiphol and Toronto’s Pearson airports as hubs where Air Canada’s market grip would gain even greater power with the purchase of Transat. WestJet wants Air Canada and Transat barred from using Pearson’s Terminal 3 to ensure room for other airlines.

WestJet’s growth plans are focused on ramping up transatlantic routes, including direct flights to Britain and Europe from Alberta and Atlantic Canada. The company has acquired six Boeing 787 Dreamliner aircraft to augment its fleet of smaller Boeing 737 jets.

WestJet is also taking its concerns with the planned takeover to European Union competition watchdogs. WestJet executives said they are unable to detail those conversations because of non-disclosure agreements with EU regulators.

Transat shareholders in December voted to accept Air Canada’s per-share offer worth $5 in cash, or 0.2862 of an Air Canada share. Transat shareholders had in 2019 voted for Air Canada’s offer worth $720-million, or $18 a share, a deal the two sides renegotiated after the pandemic hammered demand for air travel.

WestJet, in its submission, urged the cabinet not to view Transat as being at risk of failure because of the pandemic, which has reduced demand for air travel by about 90 per cent.

Transat has been able to borrow $250-million and could borrow another $500-million, possibly through a federal government program, to carry on as a stand-alone company, Jean-Marc Eustache, Transat’s co-founder and CEO, said in December.

Other parties have expressed interest in Transat. Quebec businessman Pierre Karl Péladeau has also urged cabinet to block the deal and was in talks with Transat about a competing offer in the days before shareholders accepted Air Canada’s offer.

Cabinet’s review, which has no deadline, is informed by a confidential Transport Canada report and a public report from the Competition Bureau. The antitrust watchdog said in March the combination of two of Canada’s four big airlines would likely result in a “substantial lessening or prevention of competition” in airfares and vacation packages.

A Transat spokesman declined to comment. An Air Canada spokesman did not immediately respond to questions sent by email.

Allison St-Jean, a spokeswoman for Transport Minister Omar Alghabra, who took the job last week in a cabinet shuffle, declined to say when a decision is expected.

“Our government is conducting a rigorous review of the considerations raised by the proposed purchase of Transat A.T. Inc. by Air Canada, and will be taking a decision that is in the best interests of Canadians and Canada’s air sector,” Ms. St-Jean said by e-mail. “Our government will continue to support greater choice, better service, lower costs, and rigorous passenger rights for Canadian travellers.”

 

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[anonymous]

33 minutes ago, Kargokings said:

“For 25 years, WestJet has always stood for fair and transparent competition. For this reason we do not believe the proposed transaction should proceed unless the government imposes critical mitigation measures,” said Ed Sims, WestJet’s chief executive officer, in a statement to The Globe.

yeah...like when the senior VP stole AC data and told the founder about it????

 

[Guest1]

1 hour ago, anonymous said:

“For 25 years, WestJet has always stood for fair and transparent competition. For this reason we do not believe the proposed transaction should proceed unless the government imposes critical mitigation measures,” said Ed Sims, WestJet’s chief executive officer, in a statement to The Globe.

yeah...like when the senior VP stole AC data and told the founder about it????

 

 

that is what the article I posted said. .....