Air Canada stock hits new high on news of exclusive talks to buy Transat AT

Transat shares rose about 15 per cent to $12.14 while Air Canada stock gained nearly three per cent to $40

Air Canada’s interest in buying rival Transat AT Inc. for about $520 million got positive feedback from industry watchers and stock traders after the two companies announced Thursday that they’re in exclusive talks to finalize a deal.

The two companies say Air Canada — the country’s largest airline — would pay a premium price of $13 per share for Transat, the Montreal-based owner of Air Transat and numerous vacation travel businesses.

After two hours of trading Thursday, Transat shares rose about 15 per cent to $12.14 while Air Canada stock gained nearly three per cent to $40, which is above the previous all-time high set Wednesday at $39.16.

McGill University professor Karl Moore said a combination of the two companies would help grow Air Canada Vacations, which competes with Transat, WestJet and others in the leisure travel market.

“Air Canada’s plan is to grow and this is part of their growth strategy,” Moore said in an interview.

“And I think Transat is going to be in better shape because of the potential of being bought by Air Canada.”

A deal that keeps Transat’s head office in Montreal would also be greeted favourably by politicians in Quebec, just as Alberta politicians said they want to see WestJet headquarters remain in Calgary if it’s bought by Onex, Moore said.

Toronto-based Onex Corp. announced Monday that it has a friendly deal to buy WestJet Airlines Ltd. — Canada’s second-largest airline company — for about $3.5 billion, subject to approvals.

Moore said the level of competition that Air Canada faces from WestJet will increase with the financial resources of Onex.

READ MORE: Air Canada, WestJet expected to take financial hit from 737 Max 8 ban

“Who knows for sure, but my sense is that I’d be astonished if (that) deal doesn’t get approval and go forward,” Moore said.

Analyst Walter Spracklin of RBC Dominion Securities writes in a note to clients that there are a number of factors that would justify a premium price for Transat stock.

For one thing, Spracklin said, an industry consolidation “improves fundamentals in a highly competitive leisure travel market.”

For another, the addition of Transat will provide Air Canada Vacations with a broader reach.

Additionally, Spracklin said that access to Transat’s fleet — and its in-place order for Airbus A321 passenger jets — would help Air Canada strengthen its Rouge discount brand.

“From a price paid, the multiple is on the higher end, reflecting the take-out premium; however justified by the strategic merits above,” Spracklin concluded.

Air Canada chief executive Calin Rovinescu said a combination with Transat represents a great opportunity for both companies.

“The acquisition presents a unique opportunity to compete with the very best in the world when it comes to leisure travel,” Rovinescu said in a statement.

Transat chief executive Jean-Marc Eustache said earlier Thursday that an Air Canada deal represents the best prospect for maintaining or growing the number of jobs that Transat has been developing in Quebec and elsewhere.

Transat offers vacation packages, hotel stays and air travel under the Transat and Air Transat brands, with a primary focus on the transatlantic market during the summer and sun destinations through the winter.

Transat first disclosed that it had held preliminary talks regarding the possible sale of the company last month, but did not name the potential bidders at that time.

The Canadian Press

Like us on Facebook and follow us on Twitter.

Just Posted

Breakers battle into girls soccer provincials

Kelsey takes aim at top-eight finish

Enjoy family fun as the Mercury Players present ‘Beau Jest’ in Duncan run

Jim Cleough directs James Sherman’s comedy about the results of an innocent deception

Duncan man arrested for arson

A 27-year-old Duncan man was arrested Saturday, May 11 after allegedly starting… Continue reading

Cowichan Valley Regional District’s affordable-housing strategy moves forward

Board signs three-year financial agreement for initiatives

Mill Bay Garden Club show: be there or be garden deprived

This show has it all — great food, beautiful flowers, plants to purchase, garden vendors

Rescuers finally persuade Eiffel Tower climber to come down

The official said the man was ‘under control and out of danger’ on Monday night

B.C. sends 267 firefighters to help battle Alberta wildfires

Out of control fires have forced evacuations in the province

LETTER: Fletcher ‘blurs reality’ on B.C. union public construction

Bridge, highway projects awarded to companies, not unions

Killer of Calgary mother, daughter gets no parole for 50 years

A jury found Edward Downey guilty last year in the deaths of Sara Baillie, 34, and five-year-old Taliyah Marsman

Federal government funds millions to help B.C. police spot drugged driving

Many police departments have expressed wariness about using the only government-approved roadside test

Judge: Mississippi 6-week abortion ban ‘smacks of defiance’

The new law would prohibit most abortions once a fetal heartbeat can be detected

Oil companies, 24-cent gap between B.C., Alberta to be focus of gas price probe

Premier John Horgan called the spike in gas prices ‘alarming’

Motorcycle deaths spike 50% since 2017

Riders were most likely fatally crash on the weekends compared with the rest of the week

Mother of accused charged in death of Surrey teen girl found in torched SUV

Manjit Kaur Deo charged with ‘accessory after the fact’ in 2017 death of Surrey teen

Most Read