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Sunday,  May 26, 2024 11:54 PM 

And then there were two: Groupe Mach makes billion-dollar bid for Transat

  • Air
  •   06-04-2019  11:32 am

And then there were two: Groupe Mach makes billion-dollar bid for Transat

Quebec-based real estate developer Groupe Mach has submitted a bid to buy Transat for $14 per share, a dollar more than Air Canada’s $13-per-share purchase offer.

The bid, valued in excess of $1 billion and conditional on Transat terminating any further purchase discussion with Air Canada, is “the culmination of a long process,” Mach said in a press statement, which started when the company initially approached Transat in January with a purchase offer.

READ MORE: Hurdle in the sky: Air Canada, Air Transat shareholder opposes purchase bid

According to Vincent Chiara, president & CEO of Mach, “the offer would provide the opportunity for Transat to pursue its 2018-2022 strategic plan more competitively in a private setting, backed by the financial strength and extensive real estate development and ownership experience of Mach.” The offer would preserve “all operating units of Transat, including its airline, tour operator, travel agency and hotel divisions.”

What about the hotels?

Regarding hotels, the deal would also see the involvement of TM Grupo Inmobiliario, the largest residential and leisure real estate developer in Spain and preferred hotel supplier of Transat in Mexico, in exchange for a minority equity stake in Transat, approximately $15,000,000 in cash and roll-over of its three operating hotels in Mexico with approximately 1,000 rooms under the well-established banner of The Fives Hotels and Residences into Transat's platform.

“Whereas Transat's 2018-2022 strategic plan projects 5,000 rooms within six years (3,000 owned, 2,000 managed), under the extensive real estate development expertise of Mach and TM and their significant financial capacity we plan to augment and accelerate to approximately 8,000 owned rooms and 4,000 managed rooms by such time,” Mach said.

The hotel development will generate overall significant and sustainable profit margins for Transat, Mach said, in which its other operating divisions, including the airline and tourism operator will exceed the current average of over 1.2 million passengers of Air Transat travelling to sun destinations by way of travel packages.

“We will expand the travel package experience for Canadians to include European destinations at very competitive pricing, namely in Spain in which we could leverage TM's vast hotel portfolio effective in 2020,” the statement read.

No more public trading?

Mach also proposes to remove Transat shares from public trading, adding that “the public markets are not the proper setting for Transat's 2018-2022 strategic plan, particularly its hotel development strategy which shall require several years for any meaningful returns to be realized in face of pressures of immediate results from the public markets…. The transaction would reposition Transat in a private setting thereby providing it the necessary platform to be more competitive, agile and keep pace in the fast-changing leisure travel industry.”

The offer further states that in order to satisfy the Quebec government, Transat's head office, executive team and centre of decision-making would be maintained in Montreal and that Mach would “provide assurances that no layoffs of current employees in Transat or its subsidiaries will result from the transaction.”

The bid by Groupe Mach comes just days after Peter Letko and Daniel Brosseau of Montreal-based asset management firm Letko-Brosseau - the largest shareholder of both Air Transat and Air Canada - stated that Air Transat is more valuable than Air Canada’s $520 million purchase bid. The firm has approximately 20 per cent ownership in Transat and approximately 10 per cent in Air Canadavalued at $80 million and $1.1 billion respectively, the report said.

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