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Transat's shares slumped more than 22% on Monday after Air Canada scrapped its C$188.7 million ($150.83 million) buyout deal for the tour operator due to antitrust hurdles in Europe.
The failed takeover prompted several analysts to lower their ratings on Montreal-based Transat, whose business has suffered because of COVID-19.
"The catastrophic impact of the pandemic, Transat's liquidity requirements, the tenuous state of the recovery, and the elimination of a formal takeover offer for the company justify a 'reduce' recommendation," TD Securities analyst Tim James wrote in a note.
Some analysts also raised doubts on whether other suitors, including Quebec businessman Pierre Karl Péladeau (PKP), would come through given Transat's financing needs of at least $500 million.
"We would not yet assume that PKP will honour his C$5 per share offer or even buy Transat, considering that Transat stated last month that his proposal lacked evidence of financing to support a deal," Scotiabank analyst Konark Gupta said in a note.
Péladeau said on Friday his offer was still available.
Transat's shares fell to C$4.25 on Monday, marking their biggest intra-day percentage loss in over a year.
Air Canada's offer, which the airline abandoned over the European Commission's concerns around competition, would have offered a lifeline to Transat after its annual loss ballooned to more than C$355 million ($283.77 million) last year.
"In our view, traditional EPS and EBITDA-based multiples are not relevant or possible at this time due to the excessive debt in the capital structure and negative earnings," TD Securities' James said, cutting Transat's target price to C$3.25 from C$7.50.
Transat's total debt stood at over C$900 million as of Jan. 31.
Most analysts, however, said they expected some government support for Transat in the upcoming federal budget, set to be released on April 19.
($1 = 1.2511 Canadian dollars) REUTERS