Economy

Billionaire Schwartz makes $2.6 billion bet on Canada's WestJet Airlines

Billionaire Schwartz makes $2.6 billion bet on Canada's WestJet Airlines”

Private sector union Unifor said it would stand up for WestJet workers as it is sold to Onex, "a takeover specialist with a long history of cost cutting and restructuring at the companies it buys".

However, Air Canada, which hatched its own plan to buy Canadian Airlines, made several moves to complicate the Onex bid, including adopting a poison pill created to drive up the price.

It marks Onex's third bid for an airline, following its failed runs at Air Canada and Australia's Qantas Airways. WestJet shares closed on Friday at $18.52 in Toronto.

"WestJet frontline workers across Canada have been signing Unifor cards, showing that they want to have a voice in the company", said Unifor National President Jerry Dias.

WestJet CEO Gregg Saretsky on the airline's outlook and growth.

The companies announced Monday morning that they had reached a definitive agreement for the all-cash transaction, which is expected to close in late 2019 or early 2020.

Onex approached WestJet about this transaction in March and a special committee was formed by the airline's board of directors to make a decision regarding it.

WestJet founder and chairman Clive Beddoe said Onex is an ideal partner for the airline.

The deal is much-needed for WestJet, which saw a 23-percent drop in its stock over the past five years as Air Canada has soared, according to Bloomberg.

Regulators still must approve the deal, and a shareholder vote is scheduled for July.

Tyerman and other analysts were skeptical the new deal would benefit passengers through lower airfares at a carrier that has posted quarterly profits for 14 years straight, with the exception of one quarter last year.

George Ferguson, an analyst for Bloomberg, said Onex could help ensure WestJet's future success.

Two decades ago, Gerry Schwartz's Onex Corp. tried to land a major airline deal, but the transaction fizzled after a dramatic battle that gripped corporate Canada and Bay Street.

The almost 4,000 flight attendants at WestJet and WestJet Encore have unionized over the past year.

In addition to shareholder approval, the transaction must also receive the blessing of Transport Canada and the Canadian Transportation Agency.

Analyst Doug Taylor of Canaccord Genuity said the Onex deal likely will not "dramatically alter" the competitive landscape. "In our view, a private equity owner of an airline is likely to remain rational with respect to its approach to yields and profitability vs. market share", he said in a note to clients.



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