The EC will not approve AC’s proposed acquisition of Transat, according to an announcement released by Air Canada today.
As a consequence, Air Canada and Transat have mutually agreed to terminate their Arrangement Agreement.
Air Canada and Transat had originally agreed in June 2019 on the acquisition, the terms of which were subsequently amended in August 2019 and then revised in October 2020 as a result of the severe economic impact of the COVID-19 pandemic.
The acquisition was conditional on the approval of various regulatory authorities, including the European Commission.
In order to meet that key condition, Air Canada offered and enhanced a significant package of remedies, which, according to AC, went beyond the commercially reasonable efforts required of the carrier under the Arrangement Agreement. AC notes those remedies had been traditionally accepted by the EC in previous airline merger cases.
However, following recent discussions with the EC, it has become evident that the EC will not approve the acquisition based on the currently offered remedy package.
Air Canada says it concluded that providing additional, onerous remedies, which may still not secure an EC approval, would significantly compromise Air Canada's ability to compete internationally, negatively impacting customers, other stakeholders and future prospects as it recovers and rebuilds from the impact of the COVID-19 pandemic.
As a result, Air Canada and Transat have agreed to terminate the Arrangement Agreement.
To walk away, Air Canada is paying Transat a termination fee of $12.5 million.
On its part, Transat will no longer be under any obligation to pay Air Canada any fee should Transat be involved in another acquisition or similar transaction in the future.
In a separate release, Transat says it is actively pursuing negotiations to secure long term financing as it plans for relaunch. As previously published on Open Jaw, Quebecor's Pierre Karl Peladeau has indicated his desire to acquire Transat.
