Three possible Transat suitors say they are not interested in acquiring struggling airline

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At least three potential bidders for Transat AT Inc. say they are not currently interested in acquiring the tour operator after Air Canada terminated its deal to purchase the struggling company late last week.

Since the deal fell apart, Montreal-based Transat has been weighing its options, including seeking long-term funding and potential government support. In an email statement on Tuesday, it reiterated that it would also consider other acquirers, including an offer from Québecor chief executive Pierre Karl Péladeau that remains on the table.

“We will now have whatever discussions are necessary to consider all our options,” Transat spokesperson Christophe Hennebelle said in the statement.

But at least two companies that previously expressed interest say they are no longer in the running for Transat.

Montreal-based developer Groupe Mach, which bid for a block of shares in 2019 in an attempt to stop Transat’s sale to Air Canada, is no longer interested in the deal, president Vincent Chiara said in a phone interview. 

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“We have no more interest, we have moved on with other strategic partners,” Chiara said, adding that he has recently been contacted by other parties interested in submitting a joint bid for Transat, but has turned them down.

Dominik Pigeon, head of financial services company FNC Capital, which expressed interest in bidding with a group of investors in 2019, has also said that he currently is not in a position to make an offer. 

“In the current context, FNC Capital alone has not what is required to make it a success,” Pigeon said in an email statement. “Because of all these elements, Péladeau’s offer may be the best one today.”

A third potential suitor, Calgary-based WestJet Airlines Ltd., told the Financial Post in an email that its not considering bidding on Transat.

While some have speculated that WestJet might be a logical partner, the Calgary-based carrier, which was purchased by Onex Corp. and taken private in late 2019, never publicly entered the bidding on Transat.

It was, however, a strong opponent of the deal with Air Canada, arguing that the merger of Canada’s biggest and third-biggest airlines would undo “years of effort to foster true competition” in the industry, chief executive officer Ed Sims said in a blog post in February.

Péladeau, who approached Transat with an offer of $5 a share in December, has reiterated his interest in the company. The board rejected those offers as it was already in talks with Air Canada.

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“Péladeau still appears personally interested in Transat but we would not yet count on his December offer of $5 per share (which matched Air Canada’s cash offer) given Transat doesn’t have any active proposals at this time and it needs at least $500-million in liquidity this year,” Scotiabank analyst Konark Gupta said in a note.

Gupta noted that potential suitors, including Groupe Mach and WestJet, could re-emerge, the latter of which would cause fewer competition concerns.

Without a deal, beleaguered Air Transat needs money. It said in March that, if the deal were to fall through, it would need $500-million in long-term financing on top of the $250-million credit facility that expires on June 30.

It is also seeking help from the federal and Quebec governments. Transat is looking for funding under the federal government’s Large Employer Emergency Financing Facility (LEEFF) and through a potential bailout of travel and tourism companies hit hard by the pandemic, Hennebelle said.

The carrier is one of Canada’s largest sellers of vacation packages, flying travellers from Canada to sunny beaches in the Caribbean and cobble-stone streets in Europe — many destinations that have been locked down during the COVID-19 pandemic. Canada banned all direct flights to Mexico and Caribbean countries on concerns about new variants of COVID-19.

In October, Air Canada slashed the deal to $5 per share from $18 per share due to the collapse of the air travel industry during the pandemic.

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The Canadian government approved the deal in February at $5 per share, with conditions including that Air Canada keep 1,500 of Transat’s 5,000 employees, maintain its Quebec headquarters and protect Canadians from higher prices — which airline competition expert Ambarish Chandra says is nearly impossible to promise.

“It is very difficult to force companies to not raise prices and monitor what prices should be,” Chandra said. “It depends on oil prices, and global demand — they could always say that they had to raise prices because costs rose or demand fell. It’s futile.”

The support came a year after Canada’s Competition Bureau denounced the deal, saying that the companies would have controlled a combined 60 per cent of transatlantic flights in the pre-pandemic market, leading to pricier airfares for consumers.

The European Commission also criticized the deal, pushing back its decision to conduct an investigation. An initial review by the EC said the merger could significantly reduce competition on 33 routes between Canada and Europe.

Air Canada said it proposed “a significant package of remedies” in response to the Commission’s antitrust concerns on competition. It did not say what types of concessions it offered.

“The merger is more detrimental to Canadian consumers than it is to European consumers, so it’s interesting that Canada went ahead and approved it while Europe blocked it,” Chandra said.

Financial Post

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