Transat AT shares plunged as much as 22.6 per cent in the first day of trading after Air Canada pulled the plug on its takeover of the Montreal-based tour operator over Europe’s unwillingness to approve the deal.
Transat shares decreased to a low of $4.25 and were down $1.02 or 18.6 per cent at $4.47 in early Monday trading.
Air Canada shares gained 58 cents or 2.2 per cent at $27.03 on the Toronto Stock Exchange.
Canada’s largest airline announced on Good Friday that its $190 million purchase of Transat was dead.
Air Canada said it offered an enhanced package of remedies beyond what has traditionally been accepted by the commission in previous airline mergers.
“Following recent discussions with the EC, it has become evident, however, that the EC will not approve the acquisition based on the currently offered remedy package,” the company said in a statement.
“After careful consideration, Air Canada has concluded that providing additional, onerous remedies, which may still not secure an EC approval, would significantly compromise Air Canada’s ability to compete internationally, negatively impacting customers, other stakeholders and future prospects as it recovers and rebuilds from the impact of the COVID-19 pandemic.”
The European review was the final hurdle in the regulatory process after the Canadian government approved the transaction on Feb. 12 while imposing conditions.
Walter Spracklin of RBC Dominion Securities says that while he expected Air Canada to make changes to win the required approvals from the European Commission, he didn’t believe it was in the airline’s best interest to put forward an “an uneconomic remedy package that could jeopardize its future ability to compete internationally.”
He adds that the $12.5 million termination fee was immaterial, representing less than one per cent of his estimated $3.8 billion cash burn for 2021.
With files to the Canadian Press.
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