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Positive reaction from analysts to Air Canada, Transat deal

Last Updated May 16, 2019 at 10:50 am MDT

An Air Transat sign is seen Tuesday, May 31, 2016 in Montreal. Transat AT Inc. says it is in exclusive talks with Air Canada to be acquired for roughly $488 million. THE CANADIAN PRESS/Paul Chiasson

MONTREAL – Industry watchers and stock traders are reacting positively to news that Air Canada and Air Transat are in exclusive talks to finalize a deal.

Air Canada is looking to buy rival Transat AT Inc. for about $520 million.

READ MOREAir Canada offers deal to purchase Transat

The country’s largest airline would pay a premium price of $13 per share for Transat, the Montreal-based owner of Air Transat and numerous vacation travel businesses.

In morning trading, Transat shares rose about 15 per cent to $12.14 while Air Canada stock gained nearly three per cent to $40, which is above the previous all-time high set Wednesday at $39.16.

McGill University professor Karl Moore says a combination of the two companies would help grow Air Canada Vacations, which competes with Transat, WestJet and others in the leisure travel market.

He believes that Transat is going to be in better shape because of the potential of being bought by Air Canada.

Moore also says a deal that keeps Transat’s head office in Montreal would also be greeted favourably by politicians in Quebec, just as Alberta politicians said they want to see WestJet headquarters remain in Calgary if it’s bought by Onex.

Toronto-based Onex Corp. announced Monday that it has a friendly deal to buy WestJet Airlines Ltd., Canada’s second-largest airline for about $5 billion, subject to approvals.

Moore said the level of competition that Air Canada faces from WestJet will increase with the financial resources of Onex.