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Initiated in 2019, Air Canada (TSX:AC) and Transat AT Inc (TSX:TRZ) agreed to call off their merger deal earlier in April 2021. Both the companies suffered massive losses due to the pandemic, and so, financials played an important role in the termination of the deal.
But then, on Thursday, April 29, Transat AT announced receiving a bailout loan of C$ 700 million from the Trudeau government. While Air Canada has received financial aid as well, some may wonder if it decided to scrap its plan to acquire the tour operator a bit too soon.
Transat AT’s Relief Loan
The Liberal government came to the Montreal-based tour and travel operator’s rescue after all its potential bidders stepped back. Transat AT availed two credit facilities worth C$ 390 million and C$ 310 million.
Meanwhile, Air Canada was planning to buy Transat for about C$ 190 million.
Following the announcement about the bailout loan on Thursday, Transat’s stock rocketed by nearly six per cent to close at C$ 4.8 apiece.
Air Canada’s share price, on the other day, tumbled by 1.5 per cent on Thursday.
As for the impact of the merger’s termination, Air Canada may feel some heat in the upcoming quarterly earnings as its stock has already declined five per cent since the deal was scrapped, which is more than two times its bidding price.
Transat, however, has asserted that ending the deal liberated it to concentrate on reestablishing operations. It also accepted a C$ 12.5 million deal closing fee from Air Canada.
Let us glance at these airlines stocks’ performances.
Air Canada Inc (TSX:AC)
The airline stock has not shown improvement since it received the federal government’s low-interest loan facilities worth C$ 5.9 billion earlier this month. In the wake of rising debt and halted flights, its share price has slumped by 20 per cent to C$ 24.83 apiece against its March high of C$ 31 apiece.
Its stock was trading in red at C$ 24.55 apiece on Friday morning (9:30 AM EST).
Air Canada’s top line nosedived by around 73 per cent in 2020 on a year-over-year basis, led by the bleak situation of the aviation sector amid the COVID-19 pandemic.
©Kalkine Group 2021
Transat AT Inc (TSX:TRZ)
The leisure and travel company has a current market cap of C$ 181 million. Its stock opened in green at C$ 4.84 per share on Friday, April 30 (9:30 AM EST).
The travel firm’s share price has rebounded by 35 per cent from its 52-week low of C$ 3.56 apiece (October 7, 2020). However, it is still down by 13.6 per cent month-to-date (MTD).
The company posted a loss of C$ 98 million in Q1 2021 due to the COVID-related travel restrictions.
The above constitutes a preliminary view and any interest in stocks should be evaluated further from investment point of view.
