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

Stolen stamp collection has been returned to owners in Abbotsford

Good Samaritan found the stamps hidden away in some bushes and turned them over to police

Police find loaded rifle in car of ‘prolific offender’ prohibited from driving

Tyler Houle of Abbotsford arrested Wednesday in Chilliwack

Man wants guilty plea revoked in 2012 collision in Abbotsford that killed Chilliwack woman

Michael Larocque was charged in relation to crash that killed Eileen Kleinfelder

Trial slated to start Monday for accused killer of Abbotsford cop

Oscar Arfmann faces first-degree murder for death of Const. John Davidson

George Ferguson Way apartment building goes to public hearing Monday

Bike lockers signal shift in Abbotsford developers’ thinking, Banman says

B.C.’s fight to regulate bitumen through pipelines to go to Canada’s top court

BC Appeal Court judges found B.C. cannot restrict bitumen flow along Trans Mountain pipeline

Burnaby facility to dispose of 1,500 tonnes of Canada’s trash from Philippines

All 103 containers will be disposed of properly within Canada before the end of the summer

Scheer says it would take Conservatives five years to balance budget

Scheeraccused the Liberal government of spending $79.5 billion of previously unbudgeted funds

High-risk sex offender released into Surrey

Earon Wayne Giles, a Newton “tag-team rapist,” was released from prison Friday and is now living in Surrey

Vancouver woman sexually assaulted after man follows her home; suspect at large

Police are looking for an Asian man in his 40s after the incident on Vancouver’s east side.

B.C. man, 30, arrested for driving his parents’ cars while impaired twice in one day

The Vancouver-area man was arrested after officers caught him driving impaired twice in one day

UPDATE: Vancouver man dies after crash between motorcycle, transport truck

Police believe speed was a factor in Thursday collision

New airline regulations bring compensation for tarmac delays, over-bookings

Some of the new regulations will roll out in July, while others are expected for December.

Body found after fire at Surrey homeless camp, police say

Surrey RCMP say the body was found inside a shed after firefighters extinguished the fire

Most Read