Canadian financial judges have intervened to block real estate firm Group Mach from obstructing Air Canada's intended acquisition of Transat AT, the parent company of carrier Air Transat.
Quebec's financial markets administrative tribunal has blocked a trade offer by Group Mach to acquire a substantial stake in Transat AT.
Group Mach had disclosed on 2 August an offer to purchase at least 6.9 million voting shares in Transat AT – amounting to 19.5% of the company – at a price of C$14 per share.
At the time this was a higher price than the C$13 per share being offered by Air Canada for Transat AT.
Group Mach had argued that Air Canada's offer "undervalued" Transat AT and it set a 13 August deadline for Transat AT shareholders to accept the deal.
But the tribunal has accepted an application by Transat AT to block the Group Mach offer. The decision was not unanimous – two judges agreed but a third dissented – but the majority view has prevailed.
The two supporting judges state in the ruling that they consider the Group Mach offer to be "abusive" and "coercive", as well as "contrary to the public interest".
Their ruling criticises the "short timelines" for informed decision-making, adding that the tribunal has "no choice" but to intervene.
"Proper functioning of capital markets far outweighs the particular interests of investors who might wish to take advantage of this offer," says the ruling.
But the dissenting judge states that "no evidence or argument" has been presented to the tribunal which would justify the prohibition on public interest grounds.
The short consideration period for the Group Mach offer is "more than enough" to allow evaluation by an investor, the dissenting ruling says.
"Our economy is fundamentally based on a free market," adds the dissenting judge.
Any choice whether to accept or reject the offer "goes away" if the tribunal imposes a prohibition order, it says, and the tribunal must be "careful" not to deprive Transat AT shareholders of their right to take advantage of it.
But the majority ruling means Group Mach is barred from acquiring any Transat AT shares under its scheme, and also forbidden from using proxies associated with shares deposited under it.
Air Canada has since raised its offer for Transat AT to C$18 per share.
Transat AT shareholders are set to meet on 23 August to consider and vote on approving the Air Canada agreement. The board of Transat AT says it is reiterating its "unanimous recommendation" that the Air Canada tie-up is "in the best interest" of the company and its shareholders.