Mcgill University: Péladeau loses bid to remake Transat’s board and what it means for shareholders

In a crowded annual meeting room where shareholders leaned forward as ballots were counted, the phrase mcgill university appeared on a phone screen and then faded — but the outcome that mattered did not. Pierre Karl Péladeau lost his bid to take control of Transat AT Inc. ’s board, after shareholders rejected his slate and backed the incumbent directors.

Inside the annual meeting: the ballot that kept Transat’s board intact

Mr. Péladeau, who holds 9. 5 per cent of Transat through Financière Outremont Inc., had nominated three directors, including himself, and proposed shrinking the board to six members. Preliminary ballot results showed shareholders rejected his nominees and the plan to reduce the board’s size. The company’s slate of eight nominees was approved, including Transat chief executive officer Annick Guérard.

The board’s slate had the backing of major institutional shareholders Fonds de solidarité des travailleurs et travailleuses du Québec and La Caisse de dépôt et placement du Québec, which together own 16 per cent of Transat’s shares. Two major proxy advisory firms, ISS and Glass Lewis, also recommended the company’s slate, contributing to the outcome.

Mcgill University and the wider governance question

The proxy fight cast a light on competing views about corporate direction. Mr. Péladeau had publicly criticized Transat’s operational and financial performance and sought changes he said were needed. Transat mounted a campaign defending its strategy, saying it is on track to improve profitability and reduce debt.

The stakes are tangible. The company renegotiated bailout debt of $762-million in a deal that gave Ottawa a 20-per-cent ownership stake, and it reported a first-quarter loss of $29. 5-million, or 73 cents a share, while revenue rose by 5 per cent to $871-million for the quarter. Traffic, measured by revenue-passenger-miles, rose 2 per cent, and planes were 81. 5-per-cent full in the period. The company operates tours to resort destinations in the Caribbean and Europe and maintains a fleet of 43 Airbus planes. The stock fell about 1 per cent on the Toronto Stock Exchange on the day of the vote, although shares have risen about 40 per cent over the past 12 months.

Voices in and around the vote — what they said and what comes next

Susan Kudzman, the outgoing chair of Transat’s board of directors, welcomed shareholder involvement from those dissatisfied with the company’s direction but warned the ‘‘cost and distraction’’ of the proxy fight were a burden for the company. Ms. Guérard, on a conference call with analysts, said shareholders’ support gives a clear mandate to push ahead with Transat’s turnaround plan, which includes new destinations and a partnership with Porter Airlines.

Daniel Desjardins, a re-elected independent director, framed the result in democratic terms: “In public markets, proxy contests provide a democratic process for resolving different views. Shareholders are the ultimate decision-makers and the clarity they have provided today will enable governance uncertainty to recede and allow Transat to focus on executing against the expectations of shareholders and the market. ” His remark underscored a practical shift: the company can now concentrate on operations rather than governance battles.

Mr. Péladeau’s defeated nominees included André Brosseau, vice-chair of Quebecor, and Jean-Marc Léger, founder of market research company Leger. The outcome leaves Transat’s existing board intact and the contest between activist investor intentions and incumbent strategy unresolved in broader terms.

Back in the meeting room, where the day’s energy had been a mash of impatience and relief, the practical work of a turnaround moved back into focus. The word mcgill university resurfaced only as a stray search on a handset, a reminder that shareholders juggle many interests — but for Transat, the immediate imperative is to translate the board’s mandate into clearer profitability and reduced leverage. Whether that will satisfy critics who wanted deeper change remains an open question.