In the absence of a marriage with Air Canada, the largest shareholder of Transat AT wants the tour operator to continue to stand on its own feet and says it is prepared to put its shoulder to the wheel to make this scenario a reality.
Posted on April 7, 2021 at 3:33 p.m.
Updated at 4:33 p.m.
Letko, Brosseau & Associés would be ready to support certain means, such as buying more shares as part of an issue of preferential subscription rights, in order to allow Air Transat’s parent company to have stronger kidneys.
“When we spoke to the management (of Transat), we indicated that we would be ready to do that and the message was passed,” explained Peter Letko, the co-founder of the Montreal firm, Wednesday, during a telephone interview in which he repeated that he was not interested in the offer of $ 5 per share from Pierre Karl Péladeau.
Mr. Letko explained that he was not surprised to learn last Friday that the arrangement of 190 million between the two companies no longer held because of the reluctance of the European Commission – whose authorization was essential – to approve the transaction. Ottawa had given the green light, but with a series of conditions.
The investor believes that the tour operator’s brand is “strong” and that there will be demand for leisure travel after the COVID-19 pandemic as people will want to go elsewhere.
But in order to be able to get through the year, Transat AT must now complete financing of at least half a billion dollars. It relies both on the federal Emergency Credit program for large employers (CUGE) as well as on a possible sectoral assistance plan from Ottawa to the airline industry. The Legault government has also shown itself open to offering financial support.
According to a spokesperson for the tour operator, Christophe Hennebelle, discussions were “very advanced” with the Trudeau government.
“We have no comments on the private discussions that we might have,” he replied, when asked about the words of the co-founder of Letko, Brosseau & Associés.
According to the financial data firm Refinitiv, the firm holds approximately 12.7% of the outstanding shares of Transat AT, ahead of the Fonds de solidarité FTQ (11.55%) and the Caisse de dépôt et placement du Québec (5, 83%). The two institutional investors declined to comment on the scenario put forward by Mr. Letko.
Partner, but not seller
In an interview, the latter explained that he would be “very happy” to see Mr. Péladeau get involved in order to support the tour operator and help him get through the current period of turbulence. However, the co-founder of Letko, Brosseau & Associés was careful to add that the $ 5 offer per share of cash offered by the businessman was “very modest.”
“If he (Mr. Péladeau) were a significant shareholder involved in the financing of the company, I would have no problem with that,” said Mr. Letko. But we don’t want to sell at that price ($ 5 per share) ”.
As of Wednesday afternoon, it had not been possible to obtain a reaction from the controlling shareholder of Quebecor.
Last December, Letko, Brosseau & Associés voted in favor of the revised offer to $ 5 per share proposed by Air Canada. Mr. Letko explained that the firm had acted in this way because it could exchange each share of Transat AT for 0.2862 shares of the largest air carrier in the country. If the arrangement had still been valid, this option would have conferred, on Wednesday, a value of approximately $ 7.91 for each Transat AT share.
Mr. Letko did not comment on the possibility of seeing other potential buyers – the names of WestJet and Air France / KLM have been mentioned by some observers – put forward an offer to acquire the tour operator.
Air Transat planes are currently grounded at least until mid-June since the company accepted, last January, the Trudeau government’s request to temporarily suspend travel to sun destinations as part of a effort to curb the spread of COVID-19.
In its most recent annual report, Transat AT anticipated that it would have to wait until 2023 before seeing its activities return to a level similar to that before the health crisis.
On the Toronto Stock Exchange on Wednesday, the company’s stock closed at $ 4.55, up four cents, or 0.89%.