Air Canada stock hits new high on news of exclusive talks to buy Transat AT

Transat shares rose about 15 per cent to $12.14 while Air Canada stock gained nearly three per cent to $40

Air Canada’s interest in buying rival Transat AT Inc. for about $520 million got positive feedback from industry watchers and stock traders after the two companies announced Thursday that they’re in exclusive talks to finalize a deal.

The two companies say Air Canada — the country’s largest airline — would pay a premium price of $13 per share for Transat, the Montreal-based owner of Air Transat and numerous vacation travel businesses.

After two hours of trading Thursday, Transat shares rose about 15 per cent to $12.14 while Air Canada stock gained nearly three per cent to $40, which is above the previous all-time high set Wednesday at $39.16.

McGill University professor Karl Moore said a combination of the two companies would help grow Air Canada Vacations, which competes with Transat, WestJet and others in the leisure travel market.

“Air Canada’s plan is to grow and this is part of their growth strategy,” Moore said in an interview.

“And I think Transat is going to be in better shape because of the potential of being bought by Air Canada.”

A deal that keeps Transat’s head office in Montreal would also be greeted favourably by politicians in Quebec, just as Alberta politicians said they want to see WestJet headquarters remain in Calgary if it’s bought by Onex, Moore said.

Toronto-based Onex Corp. announced Monday that it has a friendly deal to buy WestJet Airlines Ltd. — Canada’s second-largest airline company — for about $3.5 billion, subject to approvals.

Moore said the level of competition that Air Canada faces from WestJet will increase with the financial resources of Onex.

READ MORE: Air Canada, WestJet expected to take financial hit from 737 Max 8 ban

“Who knows for sure, but my sense is that I’d be astonished if (that) deal doesn’t get approval and go forward,” Moore said.

Analyst Walter Spracklin of RBC Dominion Securities writes in a note to clients that there are a number of factors that would justify a premium price for Transat stock.

For one thing, Spracklin said, an industry consolidation “improves fundamentals in a highly competitive leisure travel market.”

For another, the addition of Transat will provide Air Canada Vacations with a broader reach.

Additionally, Spracklin said that access to Transat’s fleet — and its in-place order for Airbus A321 passenger jets — would help Air Canada strengthen its Rouge discount brand.

“From a price paid, the multiple is on the higher end, reflecting the take-out premium; however justified by the strategic merits above,” Spracklin concluded.

Air Canada chief executive Calin Rovinescu said a combination with Transat represents a great opportunity for both companies.

“The acquisition presents a unique opportunity to compete with the very best in the world when it comes to leisure travel,” Rovinescu said in a statement.

Transat chief executive Jean-Marc Eustache said earlier Thursday that an Air Canada deal represents the best prospect for maintaining or growing the number of jobs that Transat has been developing in Quebec and elsewhere.

Transat offers vacation packages, hotel stays and air travel under the Transat and Air Transat brands, with a primary focus on the transatlantic market during the summer and sun destinations through the winter.

Transat first disclosed that it had held preliminary talks regarding the possible sale of the company last month, but did not name the potential bidders at that time.

The Canadian Press

Like us on Facebook and follow us on Twitter.

Just Posted

Advance polls ‘very busy’ over the weekend in Williams Lake, says Federal election official

Residents still have all day Tuesday to cast their ballot in advanced polls in Williams Lake

GoFundMe started after fire leaves Ruth Lake cabin severely damaged

‘The fire hit hard and fast - he lost everything’

Fire Prevention Week: Practise makes perfect at Horsefly fire department

The Horsefly Volunteer Fire Department has been operating since 1993

Fire Prevention Week: Big Lake Volunteer Fire Department proud to serve the community

The Big Lake Volunteer Fire Rescue covers a vast area of 522 square kilometers

VIDEO: Trudeau plays defence in Maritimes today while Scheer fights for seats in Quebec

NDP Leader Jagmeet Singh, whose party has been on the rise in recent polls, is campaigning in Toronto

Advance voter turnout up 25% for first two days: Elections Canada

Two million people voted Friday and Saturday

Okanagan principals told to confiscate vaping products from students

Vaping is up 74 per cent in youth over the last two years, according to one Canadian study

‘Rather mild’ winter expected in B.C. this year

Northwestern B.C. will be the worst hit

Court action in Trail acid spills may take years

B.C. court case involves a number of defendants and a number of plaintiffs

In the news: Sprinting to the election finish line and anger amid Manitoba storms

First Nations residents forced to evacuate their Manitoba homes after a recent snowstorm

BC Ferries sees steady traffic of post-Thanksgiving weekend travellers

Ferries filling up fast, sailing waits at some terminals

‘Save the kids!’ Dorian survivor tells the harrowing story of his Canadian wife’s death

Family held a funeral and placed Alishia Liolli’s remains in a niche at a cemetery in Windsor, Ont.

Okanagan woman, 91, votes at advance polls despite broken hip, shoulder and wrist

Angela Maynard has voted in almost every election during her lifetime

Most Read