Covid era consolidation in the aviation sector has seen Air Transat come under the wing of rival Air Canada in a cut price takeover.
The long-discussed deal has been valued at around C$190 million or C$5 a share. Air Canada had previously agreed to acquire Transat C$18 per share or C$720 million.
Transat also secured a C$250 million short-term loan led by National Bank of Canada as a bridge until the Air Canada acquisition is completed in the new year.
The terms of the original transaction restricted Transat’s ability to do so without Air Canada’s consent.
The amended agreement reflects the “unprecedented impact” of Covid-19 on the global air transport industry.
This has resulted in a severe decline in air travel since the initial agreement between was concluded and approved by Transat shareholders in August 2019.
The revised deal is expected to be completed in late January or early February 2021, subject to regulatory approvals in Canada and the European Union.
Transat chief executive Jean-Marc Eustache said: “With the volume now forecasted to be down 66% worldwide at the end of 2020, it is clear that the world has changed since the signing of the original agreement in June 2019.
“This is the worst crisis since the founding of Transat 33 years ago and with a second wave of the pandemic underway, the timing of an eventual recovery remains uncertain.
“More than ever, having a national airline with the scale to weather current industry turbulence, which is expected to continue for several years, is in the best interests of our shareholders, customers, employees and other stakeholders.”
His Air Canada counterpart Calin Rovinescu said: “Covid-19 has had a devastating effect on the global airline industry, with a material impact on the value of airlines and aviation assets.
“Nonetheless, Air Canada intends to complete its acquisition of Transat, at a reduced price and on modified terms,”
He added: “This combination will provide stability for Transat’s operations and its stakeholders and will position Air Canada, and indeed the Canadian aviation industry, to emerge more strongly as we enter the post-Covid-19 world.”
Jean-Yves Leblanc, chair of a special board-level committee at Transat overseeing the process, said: “Securing Air Canada’s consent to put in place the new loan facility was critical in the decision to revisit the terms of the original agreement with Air Canada.
“Another key factor in Transat’s decision was the likelihood of obtaining the necessary regulatory approvals before the fast arriving deadline of December 27, 2020, taking into account the significant and adverse impact of the pandemic on Air Canada’s original motivations for completing the transaction at the price set initially.
“Consummating the initial deal at C$18 was not an option that was viable given the full set of circumstances the corporation is facing,” he added.
“We believe that revised terms will provide the parties with greater incentives to address the concerns raised by regulatory agencies in order to obtain the regulatory approvals, including with respect to the offer of remedies which should provide a greater chance of obtaining the required approvals from regulatory authorities prior to the newly extended date of February 15, 2021.”
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