LET THE GUESSING BEGIN: Transat in preliminary sales talks

01 MAY 2019: Shares of Transat AT Inc. soared more than 40 percent Tuesday after the company disclosed talks about a possible sale. Transat says it is in preliminary talks with more than one party regarding a potential transaction following expressions of interest it received. The announcement came as the company prepared to hold its annual meeting in Montreal.

“I want to reiterate that the discussions are at a preliminary stage and no decision has been made on a potential transaction,” Transat AT chief executive Jean-Marc Eustache told shareholders at the beginning of the meeting.

Transat says it has formed a special committee of independent directors to evaluate the proposals with the assistance of financial and legal advisers.

The company noted the talks are at a preliminary stage and that there can be no assurance that any transaction will take place.

In its statement Transat said the situation has no impact on the clients or employees, nor on its operations, which are continuing as usual.

On the Toronto Stock Exchange, shares of the parent company of Air Transat, gained more than 43 percent, or $2.44, at $8.11 in midday trading. Shares reached a high of $8.85, which was still short of its 52-week high.

While the stock price has surged, Poirier says it was still well below Transat’s “intrinsic value” which he has conservatively pegged at $12 per share based on surplus cash, value of land and earnings.

The company has embarked on a financial turnaround and plans to build a network of hotels on sun destination beaches in the hope that this will better position it in the face of increased competition from Canadian rivals such as Air Canada Rouge, WestJet Vacations and Sunwing.

Transat did not name the potential bidders, but analyst Benoit Poirier of Desjardins Capital Markets said they could be the same groups that have expressed interest in Thomas Cook.

Informed sources told Travel Industry Today that WestJet is almost certainly an interested party. They are looking for summer European distribution something Transat could effectively provide. If this is indeed the case it will be interesting to see how the two very different cultures of those respective companies will work together.

Transat told us that there is more than one party with whom they are holding preliminary discussions and would not disclose any identities.

The main shareholder of the tour operator, which has some 5,000 employees, is Letko, Brosseau and Associates with a stake of 18.14 percent and the Quebec Federation of Labour’s Solidarity Fund with 11.58 percent. The Caisse de depot et placement du Quebec holds a 5.84 percent interest.

Air Transat was founded 33 years ago by a group of businessmen, including Eustache and current Quebec Premier Francois Legault, who left the company in 1997 before making the leap into politics.

“I had a big twinge in my heart when I was informed Monday afternoon” Legault told reporters in Quebec City. “It’s news that concerns me.”

Legault, whose government announced a $1-billion fund to protect Quebec headquarters, said “we will do everything to keep” the tour operator’s head office in the province.