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

OPINION: The more walkable a city, the more liveable it is

New pedestrian advocacy group, Walk in Nanaimo, being formed

Homelessness Action Week a call for citizens to see the issue in a new light

Homelessness Action Week Oct. 13-19 includes coffee talk, facility tours, film screening

Nanaimo Clippers thankful after three straight wins on road trip

City’s junior A hockey club wins seventh in a row, trades alternate captain

LETTER TO THE EDITOR: Empower court system, RCMP to curb crime

Justice system gives free rides to repeat offenders, says letter writer

Nanaimo Ladysmith school district deciding how best to provide menstrual products for students

Early cost estimates tag $75,000 for product dispensers; trustees seek student consultation

B.C.’s rural paramedic program expands, with home support

Advanced care ambulance staff added for six communities

BC Ferries sees steady traffic of post-Thanksgiving weekend travellers

Ferries filling up fast, sailing waits at some terminals

Proposed 76-unit residential development would neighbour north Nanaimo mall

Council approves first and second reading of re-zoning application for 4961 Songbird Pl.

Map on Elections Canada site sends voters to Cedar landfill

Address for polling station correct, but Google Map address differs

Nanaimo software designer creates hunting-themed card game

Duck Buck Moose involves skill, cunning and luck of the draw

Nanaimo-Ladysmith candidates compare, contrast platforms on debate stage

Energy policy, veterans’ affairs and more debated Thursday at Beban Park

City council mulls emergency medical responder training for firefighters

Council directs staff to prepare report on firefighter medical training upgrades

Singh says NDP would form coalition with the Liberals to stop Tories

Singh was in a Liberal-held riding Sunday afternoon in Surrey where he was pressed about his post-election intentions

‘Save the kids!’ Dorian survivor tells the harrowing story of his Canadian wife’s death

Family held a funeral and placed Alishia Liolli’s remains in a niche at a cemetery in Windsor, Ont.

Most Read