While Air Canada and Transat signed off on their definitive agreement in late June, there were still hurdles to overcome, including regulatory approval and also a green light from shareholders.
Air Canada (TSE:AC) will spend an additional C$200 million to buy Transat A.T. (TSE:TRZ) to win the support of the Canadian tour company's largest shareholder.
Air Canada, Canada's largest airline, raised its offer for Transat by 38.5% to C$18.00 per share on Sunday, winning support from its largest shareholder Letko Brosseau, which holds about 19.3% of shares. Transat's board recommended that shareholders approve the deal.
Amar Pandya, a senior investment analyst and portfolio manager for Vancouver-based PenderFund Capital Management, would not specify how the company would vote on Air Canada's offer. Air Canada's break fee is also $40 million. "Air Canada has locked up the main shareholders, and it looks like Groupe Mach's attempt has been put to bed".
The would-be deal sent Transat shares soaring by $4.96 or almost 42 per cent to close Monday at $16.77, their highest price in more than eight years.
Air Canada's stock price dipped about 1 per cent to $44.04 on Monday.
"They still need to be accountable to shareholders on why they pushed that $13-per-share offer like they pushed it", Chiara told The Canadian Press. "They definitely let these people down".
Transat shareholders are scheduled to vote on the Air Canada offer August 23 in Montreal.
"For shareholders of Transat and Air Canada, the combination delivers excellent value, while also providing increased job security for both companies' employees through greater growth prospects", said Calin Rovinescu, president and CEO of Air Canada. We know this achieves the best possible outcome for all stakeholders.
Air Canada has enough cash on hand to cover the extra $200 million. "The Quebec economy will derive maximum advantage of having a Montreal-based, growth-oriented global champion in aviation, the world's most worldwide business, spurring more employment and securing Montréal's position as a leader among world aviation centres", added Mr. Rovinescu.
Two Air Canada Boeing 737 MAX 8 aircrafts are seen on the ground as Air Canada Embraer aircraft flies in the background at Toronto Pearson International Airport in Toronto, Ontario, Canada, March 13, 2019.
Mach attempted to block the Air Canada deal with an offer to buy almost one-fifth (19.5 per cent) of Transat's voting shares for $14 per share. But Mach is not counting out the idea of another bid. The decision means the Montreal developer is not allowed to acquire any shares under its scheme and is expected to return promptly to shareholders any shares already deposited. "Mach is also forbidden from using any proxies associated with shares deposited under the scheme".
Mach disagrees with the tribunal's decision but will follow the orders, executive vice president Alfred Buggé said in an interview Monday. "The shareholder meeting is next week, so time is of the essence". He wouldn't say whether Mach will buy Transat shares, saying: "All options are on the table".
Earlier this month, Montreal real estate developer Mach had offered to buy at least 6.9 million class B voting shares of Transat, to block a rival takeover offer from Air Canada for Transat. The original agreement called for a breakup fee of $15 million. Quebec-based Groupe Mach had moved to purchase Transat for $14 a share, which prompted an outcry from Transat officials.
Shareholders are slated to vote on the Air Canada offer August 23, which is expected to face intense scrutiny from the Competition Bureau and other regulatory authorities.