Holiday travel company Transat A.T. Inc. announced it has received multiple takeover offers and is considering a sale, sending Transat’s market valuation soaring though it released scant details over who wants to buy the Montreal-based airline and tour operator.
The company has created a special committee of independent directors to evaluate proposals after more than one party expressed interest in buying the company that sells vacation packages, hotel stays and Air Transat flights.
The offers come at a bumpy time for Transat as it faces higher fuel costs, a lower Canadian dollar and increased competition for sun destinations from Sunwing, Air Canada Vacations and WestJet Vacations. It launched a long-term turnaround strategy last year that includes plans to build its own hotels, but weak winter performance led to a first-quarter loss this year.
Transat was forced to disclose the potential sale after news of the offers started to leak, president and chief executive Jean‑Marc Eustache said at Transat’s annual general meeting on Tuesday.
Transat’s stock price rose more than 46 per cent to $8.28 on the announcement, though Eustache cautioned that talks are at a preliminary stage and no decisions have been made. Citing legal reasons, Eustache declined to answer questions about when Transat received the offers, who made them or whether the company would remain in Quebec if it’s sold.
“(The board) will ultimately decide at such time when there’s something serious on the table,” he said.
At the meeting, Transat also amended its foreign ownership rules to fall in line with federal regulations adopted in May 2018. It approved the foreign ownership threshold of 49 per cent up from 25 per cent.
Internationally, potential buyers could include travel operators like Germany’s TUI Group, which already owns 49 per cent of Toronto-based Sunwing Travel Group Inc.
A European owner could make sense given the importance of transatlantic flights to Transat. In the last half of 2018, approximately 75 per cent of its total revenue came from transatlantic flights, according to a January National Bank report.
Potential local buyers for the travel company could include Canada’s two largest airlines, Air Canada and WestJet Airlines Ltd. Both declined to comment. Air Canada said it doesn’t comment on market rumours or speculation and WestJet stated it will not comment on competitive transactions.
Airline analyst Robert Kokonis, president at AirTrav Inc., who is not involved in the transaction, said it could be a “good fit” if Air Canada were to buy Transat due to the similar asset mix. Both airlines operate Airbus aircraft, whereas WestJet uses Boeing planes, he said.
“Assets are a big part,” Kokonis said. “Air Canada is flying a fleet of Airbus today… maybe it would make sense.”
WestJet, meantime, is scaling back its expansion plans even as it vies to gain share in both the budget and the business class markets.
Other options for Transat could include breaking up the company to sell its airline and tourism businesses separately, or finding private equity investors to buy the company.
Transat employs 5,000 people and operates travel to about 60 destinations in 25 countries.