MONTREAL (Reuters) – Shares in Canadian tour operator Transat A.T. Inc TRZ.TO jumped as much as 30% on Tuesday after Air Canada’s AC.TO revised offer raised optimism the deal once shaken by the COVID-19 pandemic could be completed.
On Saturday, Air Canada cut the deal value to buy Transat by nearly 75% to about C$188.7 million ($143.86 million), down from C$720 million, as COVID-19 weighs on travel demand.
With the pandemic grounding flights globally, Air Canada had faced shareholder pressure to renegotiate the deal which is still pending approval from European and Canadian regulators.
On Tuesday afternoon, Transat shares were trading at C$4.74 compared with Air Canada’s offer price of C$5.00. Air Canada shares were down 1.8%.
Analysts said the revised price would give Air Canada greater motivation to conclude the deal, which was believed to be on thin ice.
“COVID-19 has resulted in significant uncertainty for the airline industry, which made us doubt whether the combination of TRZ and AC would even occur,” Desjardins analyst Benoit Poirier said in a note to clients on Tuesday.
“We believe the revised agreement offers incentives for AC to obtain regulatory approvals for the transaction.”
Letko Brosseau, the largest shareholder in both companies according to Refinitiv data, was not immediately available for comment.
One portfolio manager who holds Air Canada stock said he believes Transat shareholders will have little option other than to approve it.
“What are the alternatives,” asked the manager who spoke on condition of anonymity as he was not authorized to speak to media. “This is the best that they are going to get in this environment.”
Transat shareholders are set to vote on the deal in early December.
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