Air Canada (TSX:AC): Ottawa Urged to Block Transat Deal

A media tycoon is urging Ottawa to deny Air Canada’s (TSX:AC) biggest deal. Here’s what that means for investors.

| More on:
An airplane on a runway

Image source: Getty Images.

Air Canada (TSX:AC) has plenty of problems in 2021. Until recently, acquisitions weren’t one of them. Last year, the company reached a formal agreement to acquire Transat A.T. (TSX:TRZ), the company that owns Air Transat. Air Canada secured favourable terms on the deal, getting a $5 per share price, down from $13. It was a huge win for the company.

But now, one influential Quebecer is urging Ottawa not to approve the deal. A high-profile media tycoon, he’s offering to pay $6 per share for the travel company, rather than $5. According to him, his deal with Transat will be better for consumers.

So, who is this Quebec investor, and does he have a real shot at stopping Air Canada’s deal?

Pierre-Karl Péladeau

Pierre-Karl Péladeau is a billionaire Quebec investor and media tycoon. He is best known for being the CEO of Quebecor Media. Previously, he was the owner of Sun Media, and Quebec’s leader of the opposition.

Péladeau is an individual with significant political clout, as both a media proprietor and politician. He has been trying to buy Air Transat for a long time. On December 14, he says, the company’s board refused his offer.

Now, he’s taking the fight to Ottawa. Saying that his offer is better than Air Canada’s, he’s lobbying Ottawa to deny the deal. Because he’s offering a higher share price, he says that his deal will be better for investors. He has also claimed that his management would be better for Transat’s customers.

It’s not clear exactly how much influence Péladeau has in Ottawa. As a politician, he represented the Parti Québécois, not the Liberals, so his connections within Trudeau’s cabinet may be limited. However, he does have significant media clout and deep connections in Quebec. Most likely he’s able to get in touch with high-level decision makers. He has claimed that he had a 90-minute interview with E.U. regulators, who voiced concerns that Air Canada’s deal might not be good for travelers between Canada and Europe.

Refund drama remains

Pierre-Karl Péladeau isn’t the only person feeling irritated by Air Canada’s takeover of Transat. Many Air Canada passengers feel the same way. When news of the Transat deal broke, many travelers complained that AC was using its resources to buy up competitors when they still hadn’t been refunded. As of right now, Air Canada says it’s working through voucher and refund requests. But the process is taking a long time, despite funds for the Transat takeover apparently being ready to go.

Foolish takeaway

For the longest time, the Air Transat deal was one of the few things Air Canada had going for it. Sure, the company may have been bleeding cash and slashing routes last year, but at least it had a big deal in the works. If Pierre-Karl Péladeau has his way, then even that’s called into question. As of right now, there’s no indication that the feds are going to block the Transat deal. But there are forces working to move them in that direction.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned.

More on Coronavirus

movies, theatre, popcorn

How Much is $1000 in AMC Stock Worth 1 Year Later?

AMC was once a stellar growth stock, but it’s taken a serious hit. So how much is $1,000 worth a…

Read more »

Airport and plane

Air Canada Stock Could Keep Trading Weak as Challenges Mount

Should you buy AC stock?

Read more »

Arrow descending on a graph

Why Cineplex (TSX:CGX) Stock Fell to 2-Year Lows Last Week

Is the recent correction in CGX stock really an opportunity?

Read more »

Business success with growing, rising charts and businessman in background

1 Growth Stock Every Canadian Investor Should Consider Right Now

This growth stock saw shares pop 10% on June 20, as one analyst stated there is a significant opportunity to…

Read more »

Aircraft wing plane

Bombardier Stock Merge: What it Means for Investors

Bombardier (TSX:BBD.B) stock went through a reverse stock split on June 13, turning 25 shares into one in one swift…

Read more »

Aircraft wing plane

Air Canada (TSX:AC) Stock: Ready to Take Off?

While Air Canada is handling what it can control really well, there are many worsening macro headwinds that will likely…

Read more »

rail train

Bull or Bear: Why Analysts Changed Their Tune on Aecon Stock

Analysts had been champing at the bit for the construction company, but the tides have turned.

Read more »

Biotech stocks

Is Bellus Health Stock Still a Buy After 30% Earnings Jump?

The biotech continues to make progress on obtaining FDA approval for its chronic-cough therapy.

Read more »