Air Canada and Transat agree to terminate buy/sell agreement

Air Canada and Transat have mutually agreed to terminate an Arrangement Agreement for the proposed acquisition of Transat by Air Canada.

The two companies had originally agreed in June 2019 on the acquisition, the terms of which were subsequently amended in August 2019 and then revised in October 2020 as a result of the severe economic impact of the COVID-19 pandemic.

The acquisition was conditional on the approval of various regulatory authorities, including the European Commission (EC).

In order to meet the EC’s key condition, Air Canada officials said the airline offered and enhanced a package of remedies, which went beyond what has been traditionally accepted by the EC in previous airline merger cases. However, the EC recently advised the two companies that it would not approve the transaction.

Both Air Canada and Transat subsequently released statements announcing the termination of the $190-million deal, with Air Canada paying Transat a termination fee of $12.5 million, and with Transat no longer under any obligation to pay Air Canada any fee should Transat be involved in another acquisition or similar transaction in the future.

Following the announcement of the termination of the buy/sell agreement, Canadian Transport Minister Omar Alghabra took to his Twitter account to issue a statement in which he wrote that the “most important thing,” in addition to protecting jobs, is “preserving the long-term viability of Transat AT. Our government will continue to support Canadian workers and a strong, competitive air transport sector.”