New Quebec Suitor Emerges For Transat

Transat says it's aware of the latest offer to buy the company, but that it's business as usual.

Group Mach Inc., the largest independent real estate developer and owner in Quebec, issued a release on Tuesday that says the company “proposes the acquisition of all issued and outstanding voting shares of Transat AT Inc. at a price of $14.00 cash per Share based on a deal value exceeding $1B, including substantial off balance sheet debt which we estimate between $1.1B and $1.2B.”

Air Canada had offered $13 per share for Transat, one dollar a share less than Mach. That offer was made May 16, with the provision that Air Canada had the exclusive right to negotiate with Transat for 30 days.

That means Mach can make its intentions known, but probably can’t actually negotiate with Transat for another 10 days or so.

Transat said it's aware of the matter.

"Transat would like to reiterate that it has entered into an agreement with Air Canada, pursuant to which it has agreed to a 30-day binding period of exclusive negotiations, beginning upon the commencement of a formal due diligence review. During this exclusivity period it is contemplated that Air Canada will complete its due diligence review and the parties will finalize the negotiation of a definitive agreement regarding the acquisition of all of the shares of Transat. This exclusivity period expires towards the end of June 2019.

Transat does not intend to provide further updates or comments with respect to the foregoing except as required by law.

There is no assurance that a definitive agreement will be reached in relation to any proposed transaction.

The operations of Transat continue in their normal course and there will be no change for its clients, suppliers and employees. In particular, travellers and clients of Transat can continue to travel and book their flights and vacation packages with Transat as usual."

Air Canada issued a statement late on Tuesday as well.

"Air Canada today said that it is in the process of finalizing its binding agreement to purchase all of the issued and outstanding shares of Transat AT Inc. and its combination with Air Canada to create an industry leading, Quebec-based leader in the global leisure travel industry. Air Canada announced on May 16, 2019 that it had entered into an exclusive agreement with Transat regarding the proposed transaction and that the agreement was subject to Air Canada completing a 30-day due diligence period now expected to be complete towards the end of June.

Air Canada's acquisition will result in job creation and economic growth in Quebec, given the travel and tourism opportunities. Moreover, Air Canada has all necessary funding to complete the transaction and therefore it is not subject to financing conditions and does not require government or taxpayer assistance.

The transaction, valued at $520 million, remains subject to the finalization of definitive agreements, confirmatory due diligence, regulatory and shareholder approvals and other closing conditions usual in this type of transaction. There is no assurance that the transaction will be completed as described in this news release or at all."

Group Mach issued a full statement on the matter earlier in the day.

“The Offer Price represents a premium of approximately 168% over the 20-day weighted average trading price prior to the announcement of Transat on April 30, 2019, and a premium of 24% over the 20-day weighted average trading price for the period ended June 3, 2019,” Mach officials said. “The Offer is subject to conditions described further below.

Context of Offer

The Offer is a culmination of a long process undertaken by Mach since last January 2019 when it approached the Company regarding a potential negotiated transaction including its initial letter of intent addressed to the Board of Directors of Transat on February 7, 2019 and various amendments thereto and other exchanges with the Company up to its announcement of last April 30, 2019.

Building Transat to be Global Leader

Mr. Vincent Chiara, President & CEO of Mach, stated: "We are excited about the potential synergies between our companies in which the leading integrated international tourism model of Transat could be combined with Mach's vast experience in overseeing the construction, ownership and management of complex real estate development projects in a cost-effective manner and its on-going initiatives at modernizing the leisure travel experience."

The Offer would provide the opportunity for Transat to pursue its 2018-2022 strategic plan more competitively in a private setting, backed by the financial strength and extensive real estate development and ownership experience of Mach. Therefore, we can effectively execute a more robust and modernized version of the higher profit margin hotel portfolio of Transat without the significant risks associated with the Company's current strategy, thereby securing long-term value for Transat.

We are of the view that the Offer is in the best long-term interests of the Company in compliance with the fiduciary duties of the Board of Directors of Transat to act in the best long-term interests of the Company for various reasons namely the following:

Our objective is to build a global leading vertically integrated leisure travel brand under the banner of Transat;

Transat's head office, executive team and centre of decision-making shall truly be based in Montreal;

Mach is committed to reassure the Quebec Government that Quebec's interests are truly protected;

Mach shall strengthen Transat's 2018-2022 strategic plan while preserving all operating units of Transat, including its airline, tour operator, travel agency and hotel divisions;

We shall preserve existing continued operational improvements in Transat's legacy airline and tour operator segments based on Transat's existing 2018-2022 strategic plan and integrate anticipated technological enhancements provided by Mach's global leading leisure travel partners;

The hotel development will generate overall significant and sustainable profit margins for Transat in which its other operating divisions, including the airline and tourism operator will exceed the current average of over 1.2 million passengers of Air Transat travelling to sun destinations by way of travel packages;