Royal Aviation confirms its intention to make a take-over bid for all the outstanding shares of Transat A.T. at a cash price of $6.00 per share

Business Wire, Oct 27, 1995

MONTREAL--(BUSINESS WIRE)--Oct. 27, 1995--Royal Aviation (ME,TSE:ROY) Royal Aviation confirms its intention to make a take-over bid for all outstanding shares of Transat A.T. at a cash price of $6.00 per share and is responding to the press release issued by Transat A.T. on October 26, 1995.

In responding to Royal's proposal to offer $6.00 per share for all of the outstanding shares of Transat, Transat raised three issues: (1) the request by Royal to have an opportunity to conduct a due diligence investigation of Transat; (2) Royal's conditions that 66 2/3 percent of Transat's common shares be tendered into the bid; (3) Royal's condition that upon completion of the offer Royal must have acquired, directly or indirectly, with the agreement of Capital d'Amerique CDPQ Inc., 100 percent of the shares of Air Transat Holidays A.T. Inc.

Royal's response to each one of these matters is as follows.

First, as regards Royal's request for an opportunity to complete a due diligence review, Royal has always been sensitive to the commercial issues involved. In its communication with the management and Board of Transat, Royal has stated that it is sensitive to the possible concern of the management and Board of Transat concerning the disclosure of commercially sensitive information during the due diligence process and has indicated its desire to work with Transat in a co-operative manner to find an effective way of dealing with this matter.

Transat has stated that it does not intend to open its books to a competitor. Royal is prepared, as previously stated, to co-operate in this regard and is prepared to have the due diligence review carried out in a way acceptable to Transat and Royal, thus avoiding the conveyance of any confidential information concerning Transat to Royal, including the use of an independent third party, where necessary.

Second, as regards Royal's condition that 66 2/3 percent of the outstanding shares be tendered into Royal's bid, Royal has noted the disclosure in Transat's Notice concerning its issued bid, which was dated October 2, 1995.

In that document, Transat indicates that there are presently 10,534,877 shares outstanding, of which 1,200,000 or 11.2 percent are owned by Le Fonds de solidarite des travailleurs du Quebec (FSTQ). The officers and directors of Transat are stated as owning 1,180,082 shares or 11.2 percent. Together, these holdings account of 22.4 percent of Transat's common shares.

If the share purchase options held by management (908,500 as per the October 2, 1995 notice and the management proxy circular dated March 10, 1995) and the shares issuable upon conversion of the convertible debenture owned by FSTQ (416,667) are included, Transat's pubic disclosure documents indicate that greater than 66 2/3 per cent of its shares are held by other than management and the FSTQ.

Based on the public information available to Royal and other shareholders, there is no reason to believe that more than 66 2/3 per cent of the shares of Transat are not available to be tendered under Royal's proposal.

If the voting agreement which exists between members of management and the FSTQ, which is not disclosed in the notice of the issuer bid, has resulted in greater than 33 1/3 per cent of the shares of Transat (after the exercise of options recently granted to management at $2.50 per share), not being available for tender under Royal's proposed take-over bid, this situation has not been publicly disclosed to Royal by Transat. Neither Royal or the shareholders of Transat are aware that effective control of Transat has been assured by management and FSTQ without providing shareholders with the premium normally associated with the transfer of control.

Royal believes that theses shareholders have an interest in considering an offer by Royal to purchase all shares at $6.00 per share.

Third, as regards the 25 per cent interest in Air Transat Holidays recently sold to Capital d'Amerique CDPQ, Royal believes that Transat has obtained a significantly lower price than fair market value for this important asset therefore negating full and fair value to its shareholders and has noted from Transat's public disclosure that capital d'Amerique CDPQ has the right, in the event of the purchase by third party of 40 per cent or more of Transat's share capital, to require Transat to repurchase its holding in Air Transat Holidays.

Royal believes that its offers is in the best interest of all shareholders of Transat and it will work co-operatively with Capital d'Amerique CDPQ, to ensure that once Royal's offer is accepted by 66 2/3 per cent of Transat's shareholders, Capital d'Amerique CDPQ will be in a position to exercise its option to require the repurchase of its holding in Air Transat Holidays.

Royal does not believe that any of the above three issues are barriers to the shareholders of Transat accepting its offer and Royal reiterates its desire to meet with the management and directors of Transat to conclude a transaction which is in the best interest of Transat's shareholders, employees and customers.