Air Canada’s proposal to acquire Air Transat
LOCATION: NATIONAL
ISSUE/SOURCE: AIR CANADA’S PROPOSAL TO ACQUIRE AIR TRANSAT
DATE: October 22, 2020
Suggested Responses
- Transport Canada takes note of the developments, including the revised arrangement, regarding the proposed acquisition of Transat, A.T. by Air Canada.
- In keeping with the process set out in the Canada Transportation Act, Transport Canada officials provided the Minister of Transport with a public interest assessment of the proposed transaction on May 2, 2020.
- Transport Canada is following the process set out in the Canada Transportation Act in proceeding with the next steps in the decision-making process.
BACKGROUND INFORMATION
- On June 27, 2019, Air Canada and Transat A.T. Inc. (the Parties) announced that they have concluded a definitive Arrangement Agreement regarding the proposed purchase by Air Canada of all issued and outstanding shares of Transat and its combination with Air Canada.
- Based in Montreal, Transat employs 5,000 people and flies roughly 3.5 million passengers a year. Air Transat is a business unit of Transat, a leading integrated international tourism company specializing in holiday travel and offering vacation packages and air travel.
- Air Canada, which employs 30,000 people, is the flag carrier and the largest airline of Canada by fleet size and passengers carried (roughly 50 million a year). The airline, founded in 1937, provides scheduled and charter air transport for passengers and cargo to 207 destinations worldwide. Air Canada's corporate headquarters are in Montreal, Quebec, while its largest hub is at Toronto Pearson International Airport.
- As per the provisions of the Canada Transportation Act, on August 26, 2019, the Minister of Transport communicated to the Parties that the proposed transaction did raise significant public interest considerations, and that a public interest assessment would be launched by the Department.
- The public interest assessment by Transport Canada of the Proposed Transaction was launched on November 4, 2019 and is ongoing.
- Transport Canada retained the services of Oxera Consulting LLP to conduct the economic and financial analysis work to support the public interest assessment.
- As per the timelines established by Minister Garneau on August 26, the Commissioner of Competition provided a report to the Minister of Transport on March 27, 2020. The Department then considered the input of the Commissioner as it provided its advice to the Minister of Transport on May 2, 2020.
- The Minister of Transport then considered this advice and directed Departmental representatives to meet with the Parties to lay out the public interest concerns. This meeting occurred on May 25, 2020.
- There followed a series of meetings and conversations among Transport Canada officials, the Parties and their legal counsels to discuss, question, review and request additional information respecting the concerns that were shared.
- The Parties announced, on October 10, 2020, that they had entered into a new and revised transaction agreement. This new arrangement pushes the tentative closing date to February 15, 2021 and sets the price that Air Canada will pay for Transat at 5$ per share rather than the previously agreed upon 18$.
- The Minister received, on October 16, 2020, a formal proposal from the parties as to the steps they are willing to undertake to alleviate the public interest and competition concerns. This submission will be considered in the Minister’s recommendation to the Governor-in-Council (GiC).
- There is no statutory timeline for the Minister to provide the recommendation to the GiC, nor is there a statutory timeline for the GiC to render its decision.
- A proposed transaction would also be evaluated by the Canadian Transportation Agency to ensure that the proposed transaction respects the foreign ownership restrictions and that the merged entity would be controlled in fact by Canadians.