"A merger with Transat is a great opportunity for both companies' stakeholders," Air Canada President and CEO Calin Rovinescu said in a statement released Thursday morning to announce the company's exclusive deal. two parts.
According to him, the transaction would be beneficial for "shareholders of Transat and Air Canada, employees of both companies, who will benefit from improved job security and growth prospects, and Canadian travelers, who will benefit from the increased ability of the merged company to become a leader in the highly competitive global leisure travel market. "
"The acquisition presents a unique opportunity to compete with the world's largest leisure travel market," he continues. "We will be able to expand our Montréal hub, the Pierre Elliott Trudeau International Airport, where we have added 35 connections since 2012 for the communities of Montreal and Quebec, from which we carried 10 million passengers. in 2018 only. ".
This all-Quebec solution will help maintain high-quality jobs in the executive management and key functions at the head office in Montreal, as well as provide a platform for future growth and jobs.
Air Canada, which says it has "all the funds necessary to complete this transaction" alone, does not intend to make any further announcements about the proposed transaction.
In a letter to Air Canada employees obtained by Radio-Canada, the company's vice-president of airline operations, Murray Strom, does not hide the fact that the proposed transaction fits into the context of "the recent acquisition. from WestJet by Onex ".
We all need to understand that this announcement is changing the face of our industry and that it would be unfortunate for Transat to go into WestJet's hands and weaken our leisure flying business.
Mr. Strom understands that the news will lead to "fears, uncertainties and obstacles" but argues that Air Canada has no choice but to adapt to changes in the airline industry. Failing to do so, "we risk the same fate as formerly exceptional carriers such as Eastern and Pan Am," he writes.
In a statement sent to Radio-Canada, the Competition Bureau confirms that it is aware of the exclusive negotiations in progress between Transat and Air Canada. "If the parties reach an agreement that is within the scope of the application of the Competition Act, the Bureau will analyze the merger," said a spokesman for the Bureau, Eric Joyce.
"Good news," says Transat
In a separate press release, Transat AT states that the 30-day exclusivity period must allow Air Canada to complete its due diligence review and finalize "the negotiation of the definitive agreement with respect to this transaction". Its President and Chief Executive Officer, Jean-Marc Eustache, presents the purchase offer as "good news".
This is an opportunity to rely on a large company that knows and understands our business and has an undeniable success in the journey. This represents the best prospect not only of maintaining but of long-term growth in the activity and jobs that Transat has developed in Quebec and elsewhere for more than 30 years.
Transat specifies that the Air Canada offer has been accepted on the "unanimous recommendation" of the special committee of directors set up to evaluate all the proposals submitted. This recommendation took into account several elements, including:
- the interest of society and its stakeholders;
- the economic and regulatory environment in which Transat operates;
- the proposed price of $ 13 per share, representing a 148.5% premium on the volume weighted average trading price for the 20 days preceding the April 30, 2019 announcement date, and a 47.8% premium the volume weighted average trading price for the 20-day period ending May 15, 2019;
- the terms and conditions of Air Canada's proposal that are considered reasonable and acceptable as a whole, including the length of the exclusivity period, the disclosure of the principal terms of the letter of intent, Air Canada's commitments, any terms and conditions of the definitive agreements.
"After having been solicited by several parties and having considered the alternatives available to Transat, the Board of Directors concluded that it is now in the interest of Transat and its stakeholders to finalize the negotiations. exclusivity with Air Canada to conclude the transaction, "says the company.
Should Transat finally accept "an unsolicited higher bid", it will have to assume a penalty of $ 15 million, the statement said. Air Canada is expected to pay $ 40 million if the agreement is to be "terminated because the required regulatory or governmental approvals have not been obtained."
In the meantime, Transat stresses that its operations are proceeding normally and that ongoing discussions "do not bring about any change for its customers, suppliers and employees".
Good news, says Legault, emotional
Prime Minister François Legault, who co-founded Air Transat in the late 1980s, argues that Air Canada's purchase of the company would be "good news" because its head office is already in Montreal.
He acknowledged that the possible purchase of his ex-company by his competitor gives him a "pinch to the heart", and that he had "a lot of emotions" when he heard the news on Wednesday night. He says he spent the night "remembering beautiful memories" of the first flight of Air Transat.
One thing that is certain is that if Air Canada buys Air Transat, we end up in Quebec with a solid head office, which will continue to grow.
Mr. Legault agreed that the transaction would somewhat reduce competition for travelers who want to travel abroad, but said he did not have too much concern about it.
However, he reiterated his willingness to put Air Canada in step with the "excessive" prices it charges for flights to remote areas of Quebec. "There is exaggeration" right now, he says, and it's important to make sure that Air Canada is satisfied with a "reasonable profit."
What I want is to have maximum prices for certain regions in Quebec. Discussions are going well with Air Canada. But actually, right now, there is abuse, because there is a monopoly on some domestic flights. This is where my main concern is.
Mr. Legault also wants more members of Air Canada's Board of Directors to be based in Montreal, although he understands that an international company wants some of its directors to be based abroad, for reasons business.
Fitzgibbon does not exclude the filing of competing offers
The Quebec Minister of Economy, Pierre Fitzgibbon, also believes that the conclusion of the transaction would be a "good thing" for both companies, while pointing out that other offers "bonuses" could come compete with that of Air Canada .
He said he spoke to the Air Canada boss right after Transat AT announced that it was in preliminary discussions with various interested parties to purchase on April 30.
"The sensitivity I had was twofold: the first was for the consumer – will travel prices in Cancun in January change? – and the employees, obviously. (…) Air Canada has the same sensitivity. Cavin (Ravisnescu), who is a Montrealer, has the same sensitivity, "he said.
For me, the strength of Air Canada, which will be accentuated if they acquire Air Transat, is a good thing for a Quebec company that shines at the international level. I think that's something to consider.
However, he added shortly afterwards that Quebec could still help another buyer who would submit "a bid (bonus), both monetary and human". Quebec businessmen Dominik Pigeon, Vincent Chiara and Pierre Karl Péladeau all showed interest in Air Transat.
"I have no idea how other buyers might react. Could they come back? The answer is yes, "said the minister. "If there is another Quebec solution, at a higher price, that the CA of Air Transat would consider appropriate, we could participate in this operation. "
The Minister did not want to comment on the impact that the proposed transaction could have on ticket prices for consumers or on the guarantees that Quebec could require from Air Canada in the event of the transaction being concluded. "What can the Government of Quebec impose on Air Canada? (…) The answer is: "not much," he said.
Are you better to have a solid company, concerned about the stakes of Quebecers, or several players not solid? I do not have the answer.
Federal Minister of Transport Marc Garneau also said the two carriers' announcement is "good news".
"We will of course study it. It's the responsibility of the federal government to look at these transactions and decide whether, first, it's in the public interest, and I'm sure (…) that the Competition Bureau will want to look at it . Then we will wait for the details before making the decisions, "he said.
Jobs could disappear
In a statement, the President and CEO of the Board of Trade of Metropolitan Montreal, Michel Leblanc, also welcomed this development, emphasizing that the tourism industry "is growing rapidly and requires significant capacity to obtain synergies and economies of scale ".
The transaction, if it is concluded, would allow to maintain the strategic decision-making levers for the future of Transat's jobs and for the deployment of Quebec expertise in the tourism industry. This is good news for our economy.
Mr. Leblanc warns, however, that the transaction is expected to result in "a certain streamlining of functions following the merger of Transat and Air Canada units targeting the same type of activity".
Nevertheless, it is a more promising outcome than if Transat were to go under property outside Quebec. "Ultimately, a stronger Montreal-based company that is better able to compete with international giants bodes well for job creation in Montréal and the strengthening of service companies that support this sector," concluded Mr. Leblanc.
The International Association of Machinists and Aerospace Workers, which is organizing mechanics for the two carriers, also suggests that it fears job losses.
Our priority in this area will be to protect our members, both at Air Transat and at Air Canada. Overall, at this point, we have more questions than answers about the future of jobs
In a statement, the union said it had contacted Air Canada right after the announcement to learn more about its "short and long term" projects.
Transaction beneficial for Air Transat, says expert
"I'm happy that the Onex-WestJet transaction has changed the game a little bit," said Mehran Ebrahimi, professor in the Department of Management and Technology at the Université du Québec à Montréal (UQAM), in Paris. microphone of Gravel in the morning.
"Air Transat was alone a bit weak. Joining a major player like Air Canada is interesting, "he says, while agreeing that the market is likely to become less competitive if the transaction materializes.
"Will this transaction pass the Competition Bureau test? If we look at Air Canada's market share and Air Transat's market share, we're at the limit, "said Ebrahimi. We will see what gymnastics they will do with the Competition Bureau to try to get this deal through. "
"That said, I think both of them will try to cheat the maximum market share, as the Canadian market is not growing," says Ebrahimi. "And both are now strong enough to try to play on lower prices to get consumers. "
Air Canada's purchase of Air Transat would put a hand on a company that reported revenues of nearly $ 3 billion in 2018, up 6%, but whose operating loss reached $ 44.5 million. This operating loss reached 38 million in the first quarter of 2019.
This situation is explained by fuel costs, the weakening of the Canadian dollar for several years and the increasing competition in the markets to the south and to Europe. The company has also invested in the construction of hotel centers near Cancun, Mexico, which do not earn anything for the moment.
Transat AT states in its press release that it has agreed to "limit its commitments and expenses related to the execution of its hotel strategy during the exclusivity period", without giving more details.
With the collaboration of Bernard Barbeau