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Transat A.T. Inc. announced that it is filing a complaint with the Tribunal administratif des marchés financiers, regarding Groupe Mach Acquisition Inc.’s conditional offer to acquire 6.9 million Class B voting shares of Transat made on Aug. 2, 2019, representing approximately 19.5 per cent of Transat’s Class B Shares.
Transat’s board of directors and the special committee of the board, supported by their financial and legal advisors continue to unanimously reiterate that the arrangement with Air Canada is in the best interest of Transat and its stakeholders and is fair to its shareholders, and unanimously recommend that Transat shareholders:
- Vote for the arrangement resolution approving the plan of arrangement with Air Canada; and
- Reject the Mach scheme and not deposit their shares with Mach.
The board, the special committee and their advisers categorically reject Mach’s scheme as highly abusive, coercive, misleading and conditional, and prejudicial to the interests of shareholders and putting them at significant risk by unfairly disregarding their interests and subverting applicable securities rules designed to protect shareholders and treat them fairly and equally and to protect the integrity of capital markets.
Notably, the board warns that Mach has made no commitment to acquire and pay for any of the shares deposited under its scheme. The scheme disenfranchises shareholders without any guarantee of compensation by (1) encouraging them to deposit their shares and concurrently grant proxies in favour of Mach for all deposited shares, irrespective of the number of shares, if any, that may ultimately be taken-up and paid for, and (2) using these proxies to vote against the proposed arrangement with Air Canada at the special meeting, and without any disclosure regarding Mach’s plans and intentions for Transat and its shareholders.
The board is highly concerned by the fact that shareholders will only find out after the special meeting whether Mach will actually take up and pay for any of the very same Class B shares already voted on their behalf at the special meeting.
Transat is taking vigorous and immediate actions against Mach’s abusive scheme to protect its shareholders.
Transat is filing an application with the Tribunal administratif des marchés financiers to challenge Mach’s scheme. In addition, Transat is reviewing other potential legal proceedings with the goal of protecting shareholders from the scheme and defending their interests, and the integrity of capital markets.
Transat is sending to its shareholders a letter containing the detailed reasons supporting the board’s recommendation that shareholders 1) vote for the arrangement resolution approving the plan of arrangement with Air Canada; and 2) Reject the Mach Scheme and not deposit their shares with Mach.
Transat has retained Kingsdale Advisors to act as its strategic shareholder adviser and proxy solicitation agent and to answer information requests from shareholders.
Mach’s scheme is not a better deal for all the shares of Transat, but a partial bid on a limited number of shares representing 19.5 per cent of the outstanding Class B shares, and therefore does not provide liquidity to all shareholders of Transat.
Contrary to its claims that it is seeking to protect Transat’s shareholders, Mach’s scheme is highly prejudicial to their interests and coercive. It is designed to create uncertainty to entice shareholders to act quickly and contrary to their own interests. The scheme is limited to the holders of Class B Shares as of July 17, 2019, the record date set by Transat to determine the shareholders entitled to vote on the Air Canada Arrangement, thus excluding all Class B shares acquired after such date. The bid also excludes all Class A variable voting shares, thereby frustrating the principle that such shares be treated on equal footing with the Class B shares.
In contrast, the Air Canada arrangement is fair to all shareholders and provides liquidity for all of the shares held by all of Transat’s shareholders, not only a small fraction of them.
By setting the mark just below the regulatory threshold of 20 per cent of the outstanding Class B shares, Mach is deliberately evading the take-over bid rules of Canadian securities laws designed to protect shareholders and afford them with a fair and equal treatment and sufficient time and information to make informed decisions.
The scheme and Mach’s concurrent proxy solicitation efforts are value-destructive for all shareholders. Mach has designed a scheme that allows it to exercise all of the voting rights of shareholders who deposit their Class B shares, before committing to purchase all or even any of them.
Mach’s scheme purports to offer a premium which will however be paid, if at all, on a limited number of shares and only on up to a maximum of 19.9 per cent of all outstanding Class B shares. Shareholders face a significant risk of receiving the price offered by Mach for only a fraction and not all of their shares, with no premium on the remainder. As a result, shareholders will be left holding substantially all, if not all, the shares they originally held with no guarantee of any future liquidity and exposed to significant market and other risks and fluctuations under the newly acquired influence and control of Mach.
The scheme is a “bait and switch” tactic: Mach wants to vote all of the Class B shares deposited by Transat shareholders while paying for none or only some of them. Mach intends to vote 100 per cent of the proxies but, in reality, may only pay for up to 19.9 per cent of the total number of Class B shares, if any at all, thereby returning the remaining voting shares to shareholders. The remaining voting shares (being at least 80.1 per cent) then held by shareholders would return to the market price that would prevail after the proposed arrangement with Air Canada has been rejected. Mach could therefore potentially unilaterally derail the transaction with Air Canada without paying a penny.
Mach’s scheme is highly conditional and can be withdrawn, modified or extended for any reason and at any time given the extremely broad and discretionary conditions attached to Mach’s scheme and crafted in its favour. Mach’s only intention is to vote against the Air Canada arrangement, thereby preventing Transat’s shareholders from receiving the premium represented by Air Canada’s offer for 100 per cent of the shares, and undermining a transaction that is in the best interest of Transat and all of its stakeholders.
The board and the special committee urge shareholders to reject Mach’s scheme, an entity with no expertise in the highly complex airline industry, no proof of financial ability to fund the scheme, and which has made multiple and changing proposals over time while failing to set out any plan or vision for Transat.
