MONTREAL — Air Canada's interest in buying rival Transat AT Inc. for about $520 million is getting positive feedback from industry watchers and stock traders.
The two companies say they're in exclusive talks to work out details of a deal that would pay a premium price of $13 per share for Transat, the Montreal-based owner of Air Transat and numerous vacation travel businesses.
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
Moore also says a deal that keeps Transat's head office in Montreal would be greeted favourably by politicians.
Analyst Walter Spracklin of RBC Dominion Securities writes in a note to clients that there are a number of factors that would justify a premium price for Transat stock.
In early trading, Transat shares rose about 15 per cent to $12.20 while Air Canada stock edged up almost two per cent to $39.50 at the Toronto Stock Exchange.
Transat chief executive Jean-Marc Eustache said earlier Thursday that an Air Canada deal represents the best prospect for maintaining or growing the number of jobs that Transat has been developing in Quebec and elsewhere.
Transat offers vacation packages, hotel stays and air travel under the Transat and Air Transat brands, with a primary focus on the transatlantic market during the summer and sun destinations through the winter.
Air Canada chief executive Calin Rovinescu said a combination with Transat represents a great opportunity for both companies.
"The acquisition presents a unique opportunity to compete with the very best in the world when it comes to leisure travel," Rovinescu said in a statement.
Transat first disclosed that it had held preliminary talks regarding the possible sale of the company last month, but did not name the potential bidders at that time.
The news of a potential sale comes after Toronto-based Onex Corp. announced a deal to buy WestJet Airlines Ltd. earlier this week.
Transat shares closed at $10.58 on the Toronto Stock Exchange on Wednesday.
Companies in this story: (TSX:TRZ, TSX:AC, TSX:WJA)