As the closing date to Air Canada's bid for Transat creeps closer, and with Groupe Mach out of the picture, yet another investor has come forward.
According to The Canadian Press, Quebecor CEO Pierre Karl Peladeau is hoping to block Air Canada's $720-million offer, or $18 per share, by voting against the bid, saying it goes against the public’s best interest.
In a press release, Peladeau writes that should Air Canada’s offer first fail, he will “discuss with [Transat’s] Board of Directors and work with it to conclude a definitive proposal at a fair price."
On Aug. 12, 2019, Air Canada agreed to increase the purchase price for the acquisition of all issued and outstanding shares of Transat, from $13 to $18 per share. Just days before Air Canada’s move, Transat launched a legal complaint with the Tribunal administratif des marchés financiers against Groupe Mach, who offered a previous bid of $14 a share, citing the offer as “highly abusive, coercive, misleading and conditional.”
Mach Scheme blocked
Groupe Mach withdrew its bid for Transat earlier in July. As a result of the Tribunal administratif des marchés financiers, Groupe Mach’s scheme was blocked, and is expected to return promptly to shareholders any shares already deposited by them to Mach under its scheme.
Air Canada has also entered into a lock-up and support agreement with Transat's largest shareholder, Letko Brosseau & Associates Inc., who beneficially owns or has control or direction over 7,277,104 Class B voting shares or approximately 19.3 per cent of all issued and outstanding shares of Transat. Under the terms of its Lock-up and Support Agreement, Letko Brosseau has agreed to support and vote all of the Class B voting shares of Transat it controls at the Special Meeting of Shareholders of Transat on Aug. 23, 2019 or at any adjournment or postponement thereof, in favour of Air Canada's acquisition of Transat.
Transat backs Air Canada's offer
According to the Canadian Press, Peladeau claims he owns about a 1.6 per cent stake in Air Transat's parent company.
Transat continues to support its arrangement with Air Canada, and says it never received an offer from Peladeau or his associates.
"Since the execution of the arrangement agreement with Air Canada on June 27, 2019, Mr. Péladeau or any other interested party could have made an offer to Transat, in the manner specifically provided for in the arrangement agreement. The process contemplated permits the offeror under any qualifying offer to undertake the necessary due diligence. Transat has not received any such offer to date."
Essentially, as no other offer has been received, Transat's Shareholders have the choice between on the one hand, receiving $18 in all-cash consideration for each Transat share they hold, or on the other hand, bearing the risks associated with the implementation of Transat’s strategic plan. Transat says that there is currently no concrete alternative transaction on the table.
In a previous statement, Jean-Marc Eustache, president and CEO, Transat, said:
"We are very pleased by the added stability brought about by Air Canada's increased bid as supported by Transat's largest shareholder, Letko Brosseau. We appreciate the time and energy that Air Canada has spent in extensive consultations with our shareholders, in addition to our own efforts, with a view to ensuring the best outcome for all stakeholders. This fully funded cash transaction is the ideal platform for Transat's continued presence and growth in Montreal. We look forward to joining forces with a proven and successful player in our highly competitive and complex industry."
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