AC/Transat Deadline Passes While Awaiting EU Approval; PKP Repeats Offer

While the Canadian government approved the sale of Transat A.T. Inc. to Air Canada last week, the European Commission has not given its approval in advance of the 15FEB deadline that was originally set by the two airlines to consummate the deal.

In a statement released to the media Tuesday, Transat indicated the EC has requested additional information from the two companies and its decision on whether or not to approve the transaction is expected to be rendered only in the first half of 2021.

According to Transat’s release, Air Canada will not extend the deadline date for its takeover which means either party can end the deal by simply notifying the other.

“Each of Air Canada and Transat are currently entitled, at any time, to terminate the Arrangement Agreement upon notice to the other party. Until terminated or amended by the parties, the Arrangement Agreement remains in effect in accordance with all of its terms,” Transat announced in its release.

Transat and Air Canada continue to discuss potential amendments to their agreement, adding that there is no assurance that an agreement on any such amendments will be reached, or that Air Canada or Transat will not terminate the agreement if warranted.

“The process to obtain the regulatory approval of the Commission is complicated by the COVID-19 pandemic and its impact on the international commercial aviation market,” said Transat in its release adding that market conditions for the airline industry have been transformed and that there is no guarantee that the EC will approve the sale.

Meanwhile, Quebec business magnate Pierre Karl Péladeau issued an open letter to the media on the weekend that reiterated his desire to purchase the tour operator himself.

The Québecor Inc. chief executive officer and former MNA said that the uncertainty over Air Canada’s takeover of Transat was a threat to the company’s survival.

WestJet CEO Ed Sims voiced his opposition to the deal last week calling it a “blatant disregard for all Canadians who believe in healthy competition,” warning of “fewer choices and higher fares” facing Canadians when travel returns.

It’s an opinion shared by some other industry experts. In an appearance on BNN Bloomberg, Robert Kokonis, president and managing director of AirTrav and frequent contributor to Open Jaw, said the move will not only impede WestJet’s international growth, but will give consumers less choice and make higher airline prices inevitable.

Air Canada agreed to buy Transat in June 2019 for $18 a share, but the deal was revised during the pandemic to a lower price. Air Canada gave Transat shareholders the option of taking $5 per share in cash or 0.2862 Air Canada shares. The deal currently has an equity value of about $200 million.

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