Although Air Canada (AC, Montréal Trudeau) remains committed to buying the tour operator Transat AT and its airline Air Transat (TS, Montréal Trudeau) despite the pandemic-caused crisis, it is now seeking to reduce the value of the deal to a quarter of what was originally anticipated, the two companies revealed in separate statements on October 10.
Transat AT said it had agreed with Air Canada one a new acquisition price of CAD5 Canadian dollars (USD3.80) a share from CAD18 (USD13.70) per share, which would lower the total value of the deal from CAD720 million (USD549 million) to CAD189 million (USD144 million).
The revised price of CAD5 a share represents a premium of 31.6% above a 20-day average for the stock on October 8, Transat said. The company's shares closed at CAD3.83 (USD2.92) on Friday, October 9.
“Air Canada intends to complete its acquisition of Transat, at a reduced price and on modified terms. 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,” Calin Rovinescu, chief executive of Air Canada, said in a statement.
“The world has changed since the signing of the original agreement in June 2019,” Jean-Marc Eustache, Transat president and chief executive, said. “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.”
The deal must be approved by two-thirds of Transat shareholders, who will vote on it in a meeting in early December. It also remains subject to court approval and other regulatory approvals in Canada and the European Union. The deal could be concluded in early 2021, with the deadline to secure approvals pushed back from late December to February 15.
The European Commission has previously set December 11 as the deadline for its investigation into the merger.
Transat AT also announced it had been able to implement a new CAD250 million (USD191 million) short-term loan facility. The increased borrowing is pending the completion of the merger.
Meanwhile, Air Canada has raised CAD485 million (USD370 million) and long-term lease commitments of CAD458 million (USD349 million) by completing sale-leasebacks for three B737-8s with Jackson Square Aviation and six B737-8s with Avolon, the airline said in a statement on October 8. The nine aircraft were delivered to Air Canada over the last three years.
Air Canada has now raised almost CAD6 billion (USD4.57 billion) in liquidity since the start of the pandemic, chief financial officer Michael Rousseau said in a release, adding that he was “pleased to be extending our strong relationship with Avolon and beginning a new relationship with Jackson Square Aviation.”
It also recently completed two long-term financings to replace CAD1.4 billion (USD1.1 billion) in short-term debt coming due within the next nine months.
Air Canada currently has twenty-four B737 MAX 8s in its fleet, the ch-aviation fleets module shows, including the nine in the sale-leaseback deals, and has a further twenty-six of the type intended for delivery but now on hold.
