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

Bashaw seed cleaning plant holds official opening

New facility operating well since January

Community mourns the deaths of two Maskwacis toddlers

Siblings found drowned on family’s property

Calgary Stampede a tough go for local cowboys

Several make the finals, but not able to close in on the big money

PHOTO: Bunnock Toss

Annual tournament draws more than 280 players to Bashaw

Wet conditions making it hard to make hay

Crops throughout central Alberta doing decently for now

Fashion Fridays: 5 casual summer dress styles

Kim XO, helps to keep you looking good on Fashion Fridays on the Black Press Media Network

Couple found dead along northern B.C. highway in double homicide

Woman from the U.S. and man from Australia found dead near Liard Hot Springs

Bank of Canada lowers qualifying rate used in mortgage stress tests

Home sales softened last year after the federal government introduced new stress test rules for uninsured mortgages

Wetaskiwin RCMP investigate indecent act at By The Lake Park

Complaint said man exposed himself in Wetaskiwin

$900M settlement reached in class action on sexual misconduct in Canadian military

After facing criticism, the government moved to begin settlement proceedings in early 2018

Chiefs honour Indigenous leader wrongfully hanged in B.C. 154 years ago today

Chief Joe Alphonse says they want his remains returned to his homeland in B.C.’s Cariboo region

Wetaskiwin RCMP investigate attempted armed robbery

Police seek information about alleged attack and identify suspect

Scrapie, a disease related to mad cow, found in two flocks of sheep in Alberta

Health Canada says there is no known link between scrapie and human health

Alberta oil and gas producer cleanup cost estimates set too low, says coalition

Canadian Natural Resources Ltd. facing the largest bill at $11.9 billion to clean up 73,000 wells

Most Read