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Vacation company Transat A.T. is buying Quebec's oldest tour operator in a deal that closes Feb. 1.

Larry MacDougal/Larry MacDougal

Vacation company Transat A.T. A.T. is buying Quebec's oldest tour operator, Caribbean specialist Vacances Tours Mont-Royal, as it continues to confront growing competition in the travel industry.

TMR, which has 80 employees in Montreal, will continue to operate as a distinct entity after the deal closes Feb. 1. Financial details weren't disclosed Thursday.

Transat's vice-president for strategy and development, Anna Malito, will be president and general manager of Vacances Tours Mont-Royal.

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Transat operates an airline, travel agencies and vacation tour packagers under numerous brands. Among its holdings is Air Transat, a chartered airline that specializes in carrying holiday travellers from Canada to southern destinations during winter months and between Canada and Europe during the summer.

"Transat, which already sells 180,000 seats a year to Vacances Tours Mont-Royal, is acquiring a long-standing partner and continuing the implementation of its vertical integration strategy," said Transat AT chief executive Jean-Marc Eustache.

Founded in 1969, Quebec's TMR specializes in the sale of holiday packages to sunny destinations in Cuba, Dominican Republic and Mexico.

It is the sixth largest tour operator in Canada to sun destinations with about five per cent, but about 15 per cent of the Quebec market.

The privately held company reported sales of $280 million in 2009, but that number is believed that have fallen to about $200 million. TMR sells about 200,000 seats annually, with 180,000 being on Air Transat.

The announcement confirms industry rumours.

Analysts said the "tuck-in acquisition" represents a "slight positive" for Transat, which is undergoing a corporate restructuring amid enhanced competition that has hurt its profitability.

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"Overall, we do not view the acquisition of TMR as a game changer but rather as a slight positive," Benoit Poirier of Desjardins Capital Markets wrote in a report.

He said the transaction removes a competitor and gives Transat greater economies of scale and increased control over pricing and on the products it offers.

With $182-million of cash available, Mr. Poirier said he doesn't believe Transat will raise debt or equity.

Ben Vendittelli of Laurentian Bank Securities called the acquisition a defensive move.

"With the purchase of air capacity from Transat, we estimate only roughly half of revenues would be incremental to Transat," he wrote.

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