Air Canada Stock – Péladeau abandons effort to buy Transat
Quebec media magnate Pierre Karl Péladeau is abandoning his effort to buy Transat AT , increasing the odds the Canadian travel company will now go it alone as it tries to rebuild its decimated business in the months ahead.
Mr. Péladeau, chief executive and controlling shareholder of Quebecor Inc., is walking away after a disagreement with Transat’s main shareholder, Letko Brosseau and Associates, over the travel company’s valuation. Letko believes Transat is worth more than $5 per share and Mr. Péladeau does not, he told Quebecor’s tabloid Journal de Montréal newspaper Thursday.
The media executive also castigated Transat’s leadership for failing to bring his two previous offers for the company to shareholders. Mr. Péladeau has previously said he was prepared to offer $5 per share for Transat, an investment the multi-millionaire intended to make on a personal basis and not via Quebecor.
“I’m no longer interested,” Mr. Péladeau is quoted as saying. “If I make a new offer, I know it’s not going get through. What’s the point of making one when you know the biggest shareholder is going to refuse?”
Transat spokesman Christophe Hennebelle declined to comment. A representative from Letko, which owns about 13 per cent of Transat stock, did not immediately respond to a request for comment.
Letko vice-president Peter Letko told The Globe and Mail last month that he will not sell his shares to Mr. Péladeau for $5 cash, saying that would amount to “giving the company away.” A previous bid for Transat by Air Canada that offered shareholders either $5 in cash or 0.2862 of an Air Canada share for each Transat share was more attractive, he said.
The $180-million deal with Air Canada was called off last month. Had it gone through, Transat shareholders choosing to be paid in Air Canada stock would have received an investment worth $6.99 per share based on Air Canada’s closing share price of $24.43 Thursday.
The exit by both Air Canada and Mr. Péladeau now increases the prospect that Transat, which owns hotels and airline Air Transat, will push on under its own steam as it tries to recover. Transat has not flown since the end of January, and halted flights for four months in 2020 because of the COVID-19 pandemic.
The company this week extended the suspension of flights until July 29 because of the continued travel restrictions in Canada and abroad. It has laid off as much as 85 per cent of its workforce, deferred aircraft lease repayments and accelerated the retirement of several planes as it lost $497-million in 2020.
The Canadian government announced a bailout for Transat last month worth as much as $700-million. The emergency aid includes loan facilities worth $390-million to fund the company’s operations and another $310-million to pay the refunds for previously cancelled flights. Transat will also issue to the government 13 million warrants, which bear the right to purchase shares in the company for $4.50 each to a maximum of 20 per cent of outstanding stock.
Transat employed 772 people as of April 28, and must maintain that level. In good times, the company employed 5,000 people in Canada.
As recently as two weeks ago, Transat Chief Executive Jean-Marc Eustache had said that negotiations with Mr. Péladeau were “going well” although the company still did not have “a real proposition” that it could work with. He declined to say whether Transat has received interest from any other investors.
Cameron Doerksen, an analyst at National Bank of Canada, has said he’s doubtful that another offer for the company will materialize at $5 a share. Transat faces several problems, he said, including a high rate of cash expenses that will nudge leverage higher, and international travel restrictions that are not expected to be lifted soon.
Transat shares closed Thursday at $4.31 on the Toronto Stock Exchange, down 4.2 per cent from the previous day’s close.
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