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

[vrefplus5]

AIR_CANADA_ACQUISITION_OF_TRANSAT_-_TERMS_AND_CONDITIONS.pdf

[Guest1]

Strange statement from WestJet, don't they view themselves as being capable to provide the necessary strong competition?   

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Canada closed to competition

11 February 2021Canadian Aviation News

Government ignores advice of its own Competition Bureau in Air Canada takeover of Transat

 

 

CALGARY, AB, Feb. 11, 2021 /CNW/ – The government of Canada on Thursday evening approved the purchase of Transat by Air Canada, without significant remedies.

“This decision shows blatant disregard for all Canadians who believe in healthy competition,” said Ed Sims, WestJet President and CEO. “When Canadians look to explore the world and reunite with family and friends once again, they will face fewer choices and higher fares.”

The government’s own Competition Bureau stated in regards to the proposed purchase, “Eliminating the rivalry between these airlines would result in increased prices, less choice, decreases in service and a significant reduction in travel by Canadians on a variety of routes where their existing networks overlap.”

“It is hard to imagine a deal as anti-competitive in any industry where the number one player buys number three without meaningful remedies,” continued Mr. Sims. “This is a serious setback to Canada’s economy. The Competition Bureau themselves described such cosmetic remedies as inadequate. Canadians should be profoundly disappointed.”

 

[Kip Powick]

[FA@AC]

17 hours ago, rudder said:

Cannot figure out a way to post the term sheet but some of the terms are fairly onerous. Most to do with release of slots if requested and competitor access to aeroplan and Maple Leaf lounges. Also mandatory maintenance contracts in QC. I assume AC had some input?

I wasn't aware of the stipulations you mention.  Was just going by what the press releases had reported.  Some of the requirements you cite do come across as being on the heavy side.  Am curious to see what happens on the 15th should EU regulatory approval not come in before then.

As for WestJet's response, well gee, if they're concerned about higher fares resulting from an AC-TS amalgamation then all they need to do is hero up and lower their own fares.

[Guest1]

A sweetener for Quebec:

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11. Maintenance in Canada Within one year following Closing, Air Canada shall negotiate, in good faith, and agree to enter into the agreements contemplated in the letter of intent between Air Canada and Avianor dated September 10, 2019 and the letter of intent between Air Canada and AAR dated February 17, 2020, regarding the construction and operation of facilities in the Province of Quebec for all airframe overhaul maintenance for all Air Canada and Air Canada Party Airbus A330, A320 family and A220 aircraft, providing that airframe overhaul maintenance shall, subject to the terms of the agreements to be entered into and consistent with the provisions of this paragraph 11, commence within four years after Closing. In particular, Air Canada shall provide its available volumes of A330, A320 and A220 airframe overhaul maintenance to support the construction and operation of A330 and A220 airframe overhaul maintenance facilities in Québec by Avianor and AAR; it being understood, however, that the decision of the independent suppliers to construct such facilities will be made based on, among other considerations, commercially reasonable volume projections, which will themselves be heavily dependent on when the Canadian airline industry is no longer substantially affected by the COVID-19 pandemic.

 

[dagger]

Interesting conditions, but I imagine most airlines wouldn't benefit as much from Aeroplan as AC would in raking in Aeroplan dollars now that it owns it again. The critical mass benefits of growing the plan further are great to the owner, and as it grows, it becomes even more unlikely any government would ever allow AC to fail since that would make every Aeroplan member an unsecured creditor.

[st27]

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regarding the construction and operation of facilities in the Province of Quebec for all airframe overhaul maintenance for all Air Canada and Air Canada Party Airbus A330, A320 family and A220 aircraft, 

Would this be a separate facility than what exists at Dorval and Mirabel??? If so, the construction of the hangar and associated costs would add heavily to the cash value of the deal. Weren't most of ACs 330s were having their heavy maintenance done off shore???

[Guest1]

On 2/12/2021 at 9:06 AM, Kargokings said:

Strange statement from WestJet, don't they view themselves as being capable to provide the necessary strong competition?   

 

"This decision shows blatant disregard for all Canadians who believe in healthy competition," said Ed Sims, WestJet President and CEO. "When Canadians look to explore the world and reunite with family and friends once again, they will face fewer choices and higher fares."

 

I quess they don't have any faith, it the fares go up as their CEO suggests, that they will be able to "Swoop" in and offer lower cost fares.  

What happened? 

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Swoop

Low Cost • Canada • RX Member

Swoop is Canada’s ultra-low fare airline of choice, on a mission to make air travel more affordable, giving more Canadians the freedom to travel where life takes them. Swoop does this by keeping costs low and passing the savings onto...

 

[Turbofan]

Setting up the situation for a WJ Sunwing approval?
 

 

[Fido]

On 2/13/2021 at 9:39 AM, Kargokings said:

A sweetener for Quebec:

 

So which loyal Liberal has links to Avinor?

[Guest1]

Explanatory note (canada.ca)

[rudder]

https://www.transat.com/en-CA/corporate/media/news-releases/124361

 

Transat Provides Status Update on Arrangement with Air Canada

MONTREAL, Feb. 16, 2021 /CNW Telbec/ - Transat A.T. Inc. ("Transat" or the "Corporation") wishes to communicate a status update regarding its contemplated arrangement with Air Canada (the "Arrangement") under the revised arrangement agreement between Transat and Air Canada dated October 9, 2020 (the "Arrangement Agreement").

As announced on February 11, 2021, although the Canadian government has approved the Arrangement, the Arrangement must still receive the approval of the European Commission (the "Commission"). The Commission has requested additional information from the parties and its decision is now expected to be rendered only in the first half of 2021.

As indicated previously, the outside date for the consummation of the Arrangement under the Arrangement Agreement (the "Outside Date") was set at February 15, 2021 and has now passed. As a result of the occurrence of the Outside Date without the prior receipt of required approval from the Commission, each of Air Canada and Transat are currently entitled, at any time, to terminate the Arrangement Agreement upon notice to the other party. Until terminated or amended by the parties, the Arrangement Agreement remains in effect in accordance with all of its terms.

Transat and Air Canada are continuing their discussions regarding potential amendments to the Arrangement Agreement that may be required. In the context of such discussions, Transat has been informed by Air Canada that Air Canada will not agree to an extension of the current Outside Date. In such case, even if the Arrangement Agreement is amended, Air Canada and Transat would retain the ability to terminate the agreement at any time. There can be no assurance that an agreement on any such amendments will be reached, or that Air Canada or Transat will not terminate the Arrangement Agreement if the relevant circumstances so warrant.

[Guest1]

Quote

 

1 hour agoTransat says Air Canada refuses to extend deal deadline

(Reuters) - Canadian tour operator Transat A.T. Inc said on Tuesday Air Canada had refused to extend the deadline for its C$188.7 million ($148.73 million) takeover deal beyond Feb. 15, after European regulators failed to give their approval.

Shares of Transat tumbled 8%, while those of Air Canada rose 3.5%.

While the companies are discussing potential amendments, there can be no assurance that an agreement will be reached, or that Air Canada or the company will not terminate the deal if the relevant circumstances so warrant, Transat said in a statement.

The European Commission, which has requested additional information from the companies, is expected to arrive at a decision only in the first half of 2021, Transat said.

The Canadian government has already approved the deal, subject to a number of conditions. (https://reut.rs/3s46Ztj)

"We expect the stock to be under pressure today although we anticipate that other interested parties will step up and show their interest in Transat," Canadian financial services group Desjardins said.

Transat had received an unsolicited takeover proposal from a private investor in late November.

($1 = 1.2687 Canadian dollars)

 

You do have to wonder, what benefit owning AirTransat would have to AirCanada vs the downside of the many strings attached to the Government's position (edict) regarding any takeover (min staff levels, maintenance etc).  In other words maybe AC would be better off to walk away from the proposed deal. 

[GDR]

BNN's take on things.

https://www.bnnbloomberg.ca/air-canada-transat-deal-on-thin-ice-as-deadline-lapses-1.1564135

[Kip Powick]

Perhaps AC is playing hardball with the Feds in that if the deal falls through, the Feds will be in the ca-ca r-e what  to do with AT. 

AC may be using the "walk-away" clause to leverage  either the Feds assisting the airlines due to COVID or get them to drop some of the conditions of the merger AT/AC ??

[FA@AC]

I haven't seen recent comment here about PKP.   

Can anyone opine on whether his interest in TS should be taken seriously?

[dagger]

43 minutes ago, Kip Powick said:

Perhaps AC is playing hardball with the Feds in that if the deal falls through, the Feds will be in the ca-ca r-e what  to do with AT. 

AC may be using the "walk-away" clause to leverage  either the Feds assisting the airlines due to COVID or get them to drop some of the conditions of the merger AT/AC ??

It is starting to feel like a four-dimensional game of chicken. Your assumption is possible, so is the possibility that the latest restrictions on travel and a slower recovery from the pandemic make this a loser for AC. Peladeau is still waving his $5 offer - but will it be $5 if he's going to make a serious offer? Or will it be $4.50 or $4. Right now, AC stock has bounded back to almost $24 as I type this, and based on the share conversion price in the current deal, a Transat share is worth $6.51 in a swap. 

[Guest1]

Péladeau makes push for Transat

 

• Calgary Herald
• 17 Feb 2021
• SANDRINE RASTELLO Bloomberg and Financial Post

Pierre Karl Péladeau

Quebec media executive Pierre Karl Péladeau said he's ready to step in and buy Transat AT Inc. now that the vacation company's takeover by Air Canada is on shaky ground.

In a statement on Twitter late Tuesday, Péladeau reiterated his “interest and determination, as well as my means” to buy Montreal-based Transat.

He made an attempt last year to do so, but Transat had already agreed to sell to Air Canada for $5 a share.

That transaction is now in jeopardy after a Feb. 15 deadline passed without approval from European regulators. Although the deal is still alive, both companies now have the right to walk away.

That means Transat's board is free to negotiate with a new buyer, Péladeau wrote. “I wish to start discussions with the leadership of Transat to enable the Quebec company to exit the grave state of uncertainty in which it's been kept for too long ” and that's threatening its future, he said. “As I have written, let's save Transat, together.”

Péladeau, the chief executive of cable and media firm Quebecor Inc., made earlier approaches to Transat of $5 and $6 a share, according to Transat's disclosures.

The board rejected them, saying they weren't financed and lacked provisions for helping the company with its 2021 working capital needs. Quebecor isn't involved in the deal.

While Air Canada has yet to clarify its position, Desjardins Securities analyst Benoit Poirier said he expects other interested buyers could come forward, including Onex Corp., the controlling shareholder of Canada's No. 2 carrier, Westjet Airlines Ltd.

“While Westjet's CEO recently expressed his disappointment following the federal government's approval of the deal, we believe the company could also be a potential contender,” Poirier wrote in a note to investors Tuesday. “Such a deal would take time to finalize, although there would be fewer antitrust issues, in our view.”

Westjet CEO Ed Sims criticized the Canadian government's decision last week to allow the deal, saying it would lead to higher prices and reduced service. Onex didn't immediately reply to a message seeking comment.

Air Canada agreed in 2019 to buy Transat for $18 a share, only to cut the price to $5 a share last October to reflect the new pandemic environment.

Transat shares fell 7.8 per cent to $4.85 on Tuesday in Toronto.

Air Canada rose 4.9 per cent to $23.42, the highest in more than a month.

Canadian regulators approved the deal last week with conditions, including a requirement that Air Canada keep 1,500 employees in its leisure travel business, start new routes within five years and keep the Transat head office in Quebec.

But the European Commission hasn't approved the deal yet and has requested more info from the companies. Its decision is now expected in the first half of 2021.

According to Péladeau, Air Canada has been perpetuating uncertainty about the deal for nearly a year-and-a-half in what he termed a threat to Transat's survival.

“By sinking Transat, a direct competitor for the great majority of transatlantic routes and sun destinations, Air Canada would have more than 60 per cent of the market, an unacceptable threshold in any industry,” he said in an open letter sent Saturday to media.

[Guest1]

Caisse CEO urges Transat to consider all options in case Air Canada deal dies

25 February 2021Canadian Aviation News

In December, the company warned it might need to raise as much as $500 million to make it through 2021, absent a deal with Air Canada.

From Montreal Gazette – link to source story

Frédéric Tomesco  •  Feb 25, 2021

CEO Charles Emond speaks during a Caisse de depot et placement du Quebec media briefing in Montreal on Thursday, February 20, 2020. PHOTO BY ALLEN MCINNIS /Montreal Gazette

Transat A.T. Inc.’s third-largest shareholder is urging the Quebec travel company to study all scenarios in case its proposed sale to Air Canada falls through – including a possible offer by Québecor Inc. chief executive Pierre Karl Péladeau.

Air Canada and Transat each have the right to walk away from the deal after the European Commission failed to approve the transaction by a Feb. 15 deadline. Transat said last week it now expects the commission to render its decision by June 30 because regulators have requested additional information from both companies.

“Like every board of directors in a situation of this nature, Transat’s board has to give itself optionality,” Charles Emond, chief executive officer of the Caisse de dépôt et placement du Québec, told reporters in Montreal Thursday.

Transat’s board “must prepare a Plan B, instead of being subjected to Air Canada’s moods,” Emond said. “My advice to the board would be to envisage what other options are on the table in the event that Air Canada pulls its offer.”

Montreal-based Transat said last month it had received a $5-a-share offer from Péladeau’s Gestion MTRHP holding company. It dismissed the proposal, citing a lack of “binding, fully committed financing or evidence of sufficient cash on hand for the purpose of making the acquisition.”

Asked specifically about Péladeau’s offer, Emond said: “It’s probably part of the menu of options that the board should think about.”

Emond said the Caisse voted in favor of Air Canada’s revised offer in December “because it was the only offer on the table. We voted yes in the best interests of our depositors, given the company’s precarious situation.”

Air Transat’s cancelled all scheduled flights until the end of April following the federal government’s decision to temporary suspend air travel to Mexico and the Caribbean.

Transat said last week it had secured a three-month extension — to June 30 at the latest — of a $250 million loan facility arranged by Export Development Canada and National Bank of Canada. In December, the company warned it might need to raise as much as $500 million to make it through 2021, absent a deal with Air Canada.

“Time is working against Transat,” Emond said. “This is a file that we’re following very closely. Transat is an important company for Quebec.”

Christophe Hennebelle, a Transat spokesman in Montreal, declined to react to Emond’s comments on Thursday.

 

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[st27]

So .... is it dead??   Lots of other things going on but could the AC bailout package possibly include the acquisition of TS? To say I have don’t trust the new Transport Minister/government would be an understatement...

[dagger]

A

49 minutes ago, st27 said:

So .... is it dead??   Lots of other things going on but could the AC bailout package possibly include the acquisition of TS? To say I have don’t trust the new Transport Minister/government would be an understatement...

At this point, the government has approved the deal with conditions, either airline could walk away from it but hasn't. The share conversion at current prices is worth about $8, so Transat isn't going to get a cash offer from someone else that can compete with that.

[rudder]

AC is in the driver’s seat. TRZ is free to terminate the deal, but won’t.

There is a new Sheriff on the top floor at AC. Perhaps less focused on legacy  and more focused on the impact on the bottom line of AC in consummating the TRZ transaction.

No final decision until CDN sector aid is announced and EU conditions for approval are revealed. It will be a math exercise looking at both the revenue/margins and unit costs/debt implications of either outcome.

 

[Maverick]

If AC has the option to walk on this deal and doesn't I'll be stunned.

Old aircraft (for the most part), high seniority pilots, cratered demand and the EU is not fond of the idea either.

FWIW, there's now at least four TS A330's in Marana.

[rudder]

Interesting analyst call this morning.

Lots of talk about Plan B (no AC transaction).

Restart flying operations mid June 2021.

Fleet getting smaller. Will be 330/321NEO only.

 

[st27]

Giving the government notice??
 

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With its purchase by Air Canada in jeopardy, tour operator Transat AT Inc. said it’s exploring government loans and even cast doubt on its survival.

Montreal-based Transat said it needs at least $500 million in long-term financing to cover its needs in case the transaction, which is still under European Union review, falls through. It said options include the federal government’s emergency program for large businesses, which has been used by only one airline as the industry negotiates a bailout.

https://financialpost.com/transportation/airlines/air-transat-casts-doubt-on-survival-if-air-canada-deal-fails