Air CanadaB次元官网网址檚 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 theyB次元官网网址檙e in exclusive talks to finalize a deal.
The two companies say Air Canada B次元官网网址� the countryB次元官网网址檚 largest airline B次元官网网址� 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.
B次元官网网址淎ir CanadaB次元官网网址檚 plan is to grow and this is part of their growth strategy,B次元官网网址� Moore said in an interview.
B次元官网网址淎nd I think Transat is going to be in better shape because of the potential of being bought by Air Canada.B次元官网网址�
A deal that keeps TransatB次元官网网址檚 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 itB次元官网网址檚 bought by Onex, Moore said.
Toronto-based Onex Corp. announced Monday that it has a friendly deal to buy WestJet Airlines Ltd. B次元官网网址� CanadaB次元官网网址檚 second-largest airline company B次元官网网址� 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.
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B次元官网网址淲ho knows for sure, but my sense is that IB次元官网网址檇 be astonished if (that) deal doesnB次元官网网址檛 get approval and go forward,B次元官网网址� 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 B次元官网网址渋mproves fundamentals in a highly competitive leisure travel market.B次元官网网址�
For another, the addition of Transat will provide Air Canada Vacations with a broader reach.
Additionally, Spracklin said that access to TransatB次元官网网址檚 fleet B次元官网网址� and its in-place order for Airbus A321 passenger jets B次元官网网址� would help Air Canada strengthen its Rouge discount brand.
B次元官网网址淔rom a price paid, the multiple is on the higher end, reflecting the take-out premium; however justified by the strategic merits above,B次元官网网址� Spracklin concluded.
Air Canada chief executive Calin Rovinescu said a combination with Transat represents a great opportunity for both companies.
B次元官网网址淭he acquisition presents a unique opportunity to compete with the very best in the world when it comes to leisure travel,B次元官网网址� 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
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