A deal that would see Canada’s largest airline acquire rival carrier Transat AT is officially dead.
Air Canada and Transat both released statements on Friday announcing the mutual termination of the $190 million deal.
The companies cited regulatory barriers as the reason, noting European authorities have indicated their unwillingness to follow the lead of Canadian officials and approve the transaction.
“While both companies expected the proposed transaction to result in compelling benefits to shareholders, customers and other stakeholders, and even though we had received approval from the Canadian authorities, it has now become evident that we would not obtain the approval of the, European Commission,” Jean-Marc Eustache, president of Transat, said in a statement.
The deal that would have seen Air Canada acquire Transat was first announced in 2019, before the COVID-19 pandemic ravaged market conditions across the transportation and tourism industries.
The value of the merger changed multiple times and was last revised in October 2020.
But Air Canada says resistance from the European Commission, tasked with signing off on the acquisition, is what ultimately sounded the deal’s death knell.
“Following recent discussions with the EC, it has become evident, however, that the EC will not approve the acquisition based on the currently offered remedy package,” the company said in a statement.
“After careful consideration, Air Canada has concluded that providing additional, onerous remedies, which may still not secure an EC approval, would significantly compromise Air Canada’s ability to compete internationally, negatively impacting customers, other stakeholders and future prospects as it recovers and rebuilds from the impact of the COVID-19 pandemic.”
Transat said in a statement it would consider other opportunities, mentioning Pierre Karl Péladeau by name.
Péladeau, the Quebec businessman and former politician had previously expressed interest in an offer to acquire Transat.
EU’s Vestager cites competitive concerns
Air Canada says it till pay Transat a termination fee of $12.5 million, while the other airline no longer has any financial obligations related to the deal.
Air Canada offered insufficient concessions to address competition concerns about its planned acquisition, European Union antitrust chief Margrethe Vestager said on Friday.
Vestager said she had strong concerns about the impact of the deal that Air Canada had failed to allay.
“While the coronavirus outbreak has strongly impacted the airline sector, the preservation of competitive market structures is essential to ensure that the recovery can be swift and strong,” she said in a statement.
“The proposed transaction would raise competition concerns on a large number of transatlantic routes. Based on the results of the market test, the remedies offered appeared insufficient.”