Air Canada91裸聊视频檚 interest in buying rival Transat AT Inc. for about $520 million got positive feedback from industry watchers and stock traders after the two companies announced Thursday that they91裸聊视频檙e in exclusive talks to finalize a deal.

The two companies say Air Canada 91裸聊视频� the country91裸聊视频檚 largest airline 91裸聊视频� would pay a premium price of $13 per share for Transat, the Montreal-based owner of Air Transat and numerous vacation travel businesses.

After two hours of trading Thursday, Transat shares rose about 15 per cent to $12.14 while Air Canada stock gained nearly three per cent to $40, which is above the previous all-time high set Wednesday at $39.16.

McGill University professor Karl Moore said a combination of the two companies would help grow Air Canada Vacations, which competes with Transat, WestJet and others in the leisure travel market.

91裸聊视频淎ir Canada91裸聊视频檚 plan is to grow and this is part of their growth strategy,91裸聊视频� Moore said in an interview.

91裸聊视频淎nd I think Transat is going to be in better shape because of the potential of being bought by Air Canada.91裸聊视频�

A deal that keeps Transat91裸聊视频檚 head office in Montreal would also be greeted favourably by politicians in Quebec, just as Alberta politicians said they want to see WestJet headquarters remain in Calgary if it91裸聊视频檚 bought by Onex, Moore said.

Toronto-based Onex Corp. announced Monday that it has a friendly deal to buy WestJet Airlines Ltd. 91裸聊视频� Canada91裸聊视频檚 second-largest airline company 91裸聊视频� for about $3.5 billion, subject to approvals.

Moore said the level of competition that Air Canada faces from WestJet will increase with the financial resources of Onex.

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91裸聊视频淲ho knows for sure, but my sense is that I91裸聊视频檇 be astonished if (that) deal doesn91裸聊视频檛 get approval and go forward,91裸聊视频� Moore said.

Analyst Walter Spracklin of RBC Dominion Securities writes in a note to clients that there are a number of factors that would justify a premium price for Transat stock.

For one thing, Spracklin said, an industry consolidation 91裸聊视频渋mproves fundamentals in a highly competitive leisure travel market.91裸聊视频�

For another, the addition of Transat will provide Air Canada Vacations with a broader reach.

Additionally, Spracklin said that access to Transat91裸聊视频檚 fleet 91裸聊视频� and its in-place order for Airbus A321 passenger jets 91裸聊视频� would help Air Canada strengthen its Rouge discount brand.

91裸聊视频淔rom a price paid, the multiple is on the higher end, reflecting the take-out premium; however justified by the strategic merits above,91裸聊视频� Spracklin concluded.

Air Canada chief executive Calin Rovinescu said a combination with Transat represents a great opportunity for both companies.

91裸聊视频淭he acquisition presents a unique opportunity to compete with the very best in the world when it comes to leisure travel,91裸聊视频� Rovinescu said in a statement.

Transat chief executive Jean-Marc Eustache said earlier Thursday that an Air Canada deal represents the best prospect for maintaining or growing the number of jobs that Transat has been developing in Quebec and elsewhere.

Transat offers vacation packages, hotel stays and air travel under the Transat and Air Transat brands, with a primary focus on the transatlantic market during the summer and sun destinations through the winter.

Transat first disclosed that it had held preliminary talks regarding the possible sale of the company last month, but did not name the potential bidders at that time.

The Canadian Press

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