Transat shareholders to vote on Air Canada deal Friday

Three months after the offer was first announced, Transat A.T. Inc. (TRZ) shareholders will decide whether to approve Air Canada’s (AC) proposed acquisition of the company.

Transat shareholders are scheduled to vote on the arrangement during a special meeting in Montreal on Friday. The proposed deal would see Air Canada acquire Transat for $18 per share – an increase from its initial offer of $13 per share – valuing the transaction at approximately $720 million.

It’s a vote that many analyst expect will likely pass, particularly since Air Canada upped its offer and gained the support of Transat’s largest shareholder. Letko Brosseau & Associates Inc., which controls about 19.3 per cent of Transat’s outstanding shares, had criticized the initial offer for being too low but has since said it would support Air Canada’s bid.

“With the increase in bid, we believe shareholder approval is now highly likely,” AltaCorp Capital analyst Chris Murray said in a note to clients earlier this month.

Still, earlier this week, Quebec businessman Pierre Karl Peladeau released a statement urging shareholders to vote against the proposal, while also raising the potential of a separate offer.

Peladeau said that, should the transaction fail to obtain the required two-thirds shareholder approval, he and his partners would be prepared to work with Transat’s board of directors to come up with a fair offer for the company. He did not say who the partners are. Peladeau is the chief executive of Quebecor Inc., which is not involved in the situation.

Transat and Air Canada both released statements the day after Peleadeu’s reiterating support for the acquisition.

“There is currently no concrete alternative transaction on the table,” Transat said in a statement released this week, adding that the Air Canada deal would be beneficial for travellers, the communities where it operates, and Transat employees.

“The arrangement with Air Canada is the result of a rigorous and diligent process by Transat’s board of directors supported by financial and legal advisors over a period of more than six months.”

Air Canada said that it will keep Transat’s head office and key functions in Montreal while also maintaining the tour and travel company’s brands.

In addition to the shareholder vote, the transaction still faces several regulatory hurdles. Should the offer pass, analysts expect that the deal would face a Competition Bureau review looking at the impact on competition, airfares and job maintenance, as well as a review conducted by the Minister of Transport to ensure the agreement is in the “public interest.”

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