© Reuters. FILE PHOTO: FILE PHOTO: An Air Transat Airlines Airbus A330 aircraft takes off from Colomiers near Toulouse
From Ankit Ajmera
(Reuters) – Transat’s shares plunged more than 22% on Monday after Air Canada closed its $ 188.7 million ($ 150.83 million) buyout deal for the company due to antitrust hurdles in Europe Tour operator had canceled.
The failed acquisition prompted several analysts to downgrade their ratings on Montreal-based Transat, whose business has suffered from COVID-19.
“The disastrous effects of the pandemic, Transat’s liquidity needs, weak state of recovery and the abandonment of a formal takeover bid for the company warrant a recommendation to reduce,” Tim James, analyst at TD Securities, wrote in a note.
Some analysts also expressed doubts as to whether other applicants, including Quebec businessman Pierre Karl Péladeau (PKP), would get through, given Transat’s funding needs of at least $ 500 million.
“We wouldn’t expect PKP to honor its $ 5 per share offer or even buy Transat, considering that Transat stated last month that its proposal did not include any proof of funding to support a deal,” he said Scotiabank analyst Konark Gupta in a note.
Péladeau said on Friday that his offer was still available.
Transat’s shares fell to $ 4.25 on Monday, marking their largest one-day percentage loss in over a year.
Air Canada’s bid, which the airline abandoned over competition concerns, would have provided Transat with a lifeline after its annual loss surged to over $ 355 million ($ 283.77 million) last year .
“From our point of view, traditional multiples based on EPS and EBITDA are currently not relevant or possible due to the excessive debt of the capital structure and negative earnings,” said James of TD Securities, lowering Transat’s price target from C $ 7.50 to 3 .25 C $.
Transat’s total debt as of January 31st was over $ 900 million.
However, most analysts said they expected Transat to receive government support in the upcoming federal budget due to be released on April 19.
($ 1 = 1.2511 Canadian dollars)
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