Mach was aiming to block AC's bid for Transat by acquiring the class B shares.
Canada's largest airline and Transat, a budget airline and tour operator also headquartered in Montreal, announced Sunday that Transat's board unanimously supports Air Canada's new bid of $18 per share, a 38 per cent increase from its original offer of $13 per share or $520 million.
The increased bid is "highly likely" to receive shareholder approval, Altacorp Capital analyst Chris Murray noted to clients Monday. "Air Canada has locked up the main shareholders, and it looks like Groupe Mach's attempt has been put to bed".
Transat shares were up $4.91 at $16.70 in early trading on the Toronto Stock Exchange on Monday.
Air Canada's stock price dipped about 1 per cent to $44.04 on Monday.
"We view the take-out price is rather generous given Transat's volatile profitability profile", said analyst Mona Nazir of Laurentian Bank Securities in a note to investors. "They definitely let these people down".
Air Canada will, therefore, be able to count on the support of Transat's largest shareholder at the shareholders' meeting scheduled for August 23. Assuming all conditions are met, the deal is expected to close in early 2020. We know this achieves the best possible outcome for all stakeholders. "So Air Canada was going to walk away paying $200 million less to this company than they should have or could have". "The Quebec economy will derive maximum advantage of having a Montreal-based, growth-oriented global champion in aviation, the world's most worldwide business, spurring more employment and securing Montréal's position as a leader among world aviation centres", added Mr. Rovinescu.
Air Canada initially had offered $13 a share, a figure some in the industry thought was too low.
Two Air Canada Boeing 737 MAX 8 aircrafts are seen on the ground as Air Canada Embraer aircraft flies in the background at Toronto Pearson International Airport in Toronto, Ontario, Canada, March 13, 2019.
Group Mach's offer of $14 per share for 19.5 per cent of class B voting shares represented the only rival bid. Mach said it had no intention of launching any formal hostile takeover bid for all of Transat's voting shares.
The company is also forbidden from using any proxies associated with shares deposited under the plan.
"All options are on the table from now until shareholders meeting", Buggé said.
"We're not ready to make a decision yet", he said. It prohibited Mach from buying shares under its proposal and ordered it to return any shares already deposited. The airline had $5.9 billion of cash and cash equivalents as of June 30.
Transat has agreed to an increased break-fee of $40 million, while Air Canada's break-fee remains $40 million. Quebec-based Groupe Mach had moved to purchase Transat for $14 a share, which prompted an outcry from Transat officials.
While the deal seems all but certain to be approved by Transat, Canadian regulators could still seek changes to the deal to guarantee competitiveness for consumers. "However, assuming only minor concessions on Air Canada's part, we think the transaction is a strong strategic fit with significant synergy potential".