TORONTO — Transat’s burgeoning resorts division, launched in 2017, aims to bring the company to the next level of vertical integration that tour operators these days very much want, and need, to stay competitive. If Air Canada’s $520 million acquisition proposal goes through, the blockbuster deal could boost not just Air Canada, but Air Canada Vacations too.

Air Canada says it has entered into an exclusive agreement with Transat with an eye to buying the company in a transaction valued at $520 million.

Air Canada says the deal will create a Montreal-based global travel services company in leisure, tourism and travel distribution operating across Canada and internationally.

Transat says it has agreed to the 30-day period of exclusive negotiations with Air Canada pursuant to a letter of intent contemplating a transaction by which Air Canada would acquire all of the shares of Transat at a price of $13.00 per share.

Transat flies more than 5 million passengers annually to over 60 destinations. Its resorts division was launched in 2017 with the goal of operating 5,000 owned or managed hotel rooms by 2024. Construction is now underway on a site in Puerto Morelos, Mexico, about 40 kilometres from Cancun, with a tentative opening date in 2020.

Calin Rovinescu, President and Chief Executive of Air Canada, said in a statement: “A combination with Transat represents a great opportunity for stakeholders of both companies. This includes the shareholders of both Transat and Air Canada, employees of both companies, who will benefit from increased job security and growth prospects, and Canadian travellers, who will benefit from the merged company’s enhanced ability to participate as a leader in the highly competitive leisure travel market globally. The acquisition presents a unique opportunity to compete with the very best in the world when it comes to leisure travel. It will also allow us to further grow our hub at Montréal-Trudeau Airport, where we have added 35 new routes since 2012 to the benefit of the Montreal and Quebec communities, and from which we carried 10 million customers in 2018 alone.”

“This announcement is good news for Transat,” says Jean-Marc Eustache, President and CEO, Transat. “This is an opportunity to team up with a great company that knows and understands our industry and has had undisputable success in the travel business. This represents the best prospect for not only maintaining, but growing over the long term the business and jobs that Transat has been developing in Quebec and elsewhere for more than 30 years.”

Transat says its operations will continue in the normal course and that there will be no change for its clients, suppliers and employees. In particular, travellers and clients of Transat can continue to travel and book their vacation packages with Transat like before.

Transat’s Board of Directors has agreed to the exclusivity agreement based on a unanimous recommendation from a special committee of independent directors that was charged with examining any proposals for the acquisition of the shares of Transat, with the assistance of financial and legal advisors, and with considering all strategic options, as announced on April 30.

After being solicited by several parties and having considered available alternatives, Transat’s Board of Directors says it “has determined that it is now in the interests of Transat and its stakeholders to finalize negotiations on an exclusive basis with Air Canada with a view to completing the transaction.”

Air Canada is headquartered in Montreal and maintains one of the largest global head offices in Quebec. Close to 10,000 of the airline’s 36,000 employees are in Quebec. Air Canada’s Executive Committee members (President and Chief Executive Officer, Chief Financial Officer, Chief Commercial Officer and Executive Vice-President, Operations) in addition to many other key members of the Executive Management team are all based in the Montreal headquarters.

Air Canada also serves 11 airports across Quebec.

The Air Canada – Air Transat news comes just four days after WestJet announced it was being acquired by private equity firm Onex in a deal worth $3.5 billion plus debt. That deal is expected to go through by the end of 2019 or the beginning of 2020. It also comes just over two weeks after Transat revealed it was fielding interest from a number of suitors for its acquisition.