Trudeau Government Approves Air Canada’s Takeover of Transat

Canada’s transportation authorities approved Air Canada’s proposed takeover of Transat AT Inc., a major step toward concluding a deal that’s been in the works for more than 18 months.

The government said the coronavirus pandemic played an important role in the decision to authorize the merger. It’s imposing a number of conditions: Air Canada will have to commit to maintaining 1,500 employees in its leisure travel business, launch new routes within five years and keep the Transat brand and head office in Quebec.

The deal is still under investigation by Europe’s antitrust watchdog.

“Given the devastating impact of the Covid-19 pandemic on the air industry, the proposed purchase of Transat A.T. by Air Canada will bring greater stability to Canada’s air transport market,” Transport Minister Omar Alghabra said in an emailed statement.

“It will be accompanied by strict conditions which will support future international competition, connectivity and protect jobs. We are confident these measures will be beneficial to travelers and the industry as a whole,” the minister said.

The announcement comes as Canadian airlines struggle with tough travel restrictions, which include mandatory testing and a two-week quarantine. Officials are also negotiating with the sector on the possibility of an industry-specific bailout.

Prime Minister Justin Trudeau announced in January an agreement with the country’s major carriers to cancel all flights to Mexico and the Caribbean until April 30, a key period for airlines that shuttle Canadians to sunnier locales.

Montreal-based Air Canada and Transat began exclusive negotiations in May 2019 with a C$13-per-share takeover bid on the table. But Transat shareholders balked at the price, forcing Air Canada to raise its offer to C$18 to seal a friendly deal.

But the Covid-19 pandemic hit before regulators signed off and in October the two sides agreed on a dramatically reduced price -- C$5 a share. Air Canada offered Transat investors the option of taking shares instead of cash so they can participate in an industry recovery.

Transat shareholders voted 91% in favor of the deal on Dec. 15.

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