News has just come out that Westjet, Canada’s second largest airline, will go private in a sale to Onex Corporation. Reports started to emerge from various Canadian media outlets on Monday morning about the sale, said to be worth $5 billion Canadian dollars ($3.7 billion USD). The deal will also acquire Westjet’s outstanding debts. All dollar values presented below are in Canadian dollars unless otherwise noted.
Details of the deal
According to reports from the Globe and Mail, this deal will close later this year or in 2020.
The all-cash deal between the two companies will see Onex Corporation pay $31 per share. Trading publicly on the Toronto Stock Exchange, shares jumped on this news: on Friday the company was trading at $18.52. However, at the time of this article’s writing, the share price is $29.90 – a jump of over 60%. This deal will turn the publicly traded airline into a privately held company.
Clive Beddoe, WestJet’s founder and chairman commented on the Onex deal in a statement:
“I am particularly pleased that WestJet will remain headquartered in Calgary and will continue to build on the success that our 14,000 WestJetters have created.”
On the Onex side, Tawfiq Popatia, a managing director at Onex said:
WestJet is one of Canada’s strongest brands and we have tremendous respect for the business that Clive Beddoe and all WestJetters have built over the years.”
Going on social media, Westjet made an announcement via Twitter:
Today we announced we have entered into a definitive agreement that provides for our acquisition in an all-cash transaction. Read the full release here: https://t.co/oN87D2Iod2 pic.twitter.com/Bhf7nITLgg
— WestJet (@WestJet) May 13, 2019
About Onex Corporation
According to the Onex website, the corporation was founded in 1984 and “manages and invests capital from around the world”. The company currently manages roughly $31 billion USD in assets.
In the Onex portfolio are companies ranging from parking lot management to film production to discount grocery stores. Some of the more relevant brands under Onex ownership include:
- Lufthansa affiliated catering company LSG Sky Chefs
- Aerostructures manufacturer Spirit Aerosystems (fuselage maker for the 737, 787)
This is Onex’s second attempt at purchasing a Canadian airline. In 1999, Onex offered Canadian Airlines $1.8-billion for ownership. However, this bid was dropped after being ruled out of line by a Quebec court. Canadian Airlines ceased operations in 2001.
What’s different this time? Last year, the Canadian government changed laws surrounding foreign ownership of an airline, up to 49% from 25%.
What does this mean for Westjet?
As a multi-billion dollar corporation managing companies all-over the world, this may mean some increased stability for Westjet. Last year the airline posted its first quarterly loss in 13 years due to a costly pilot’s strike. This year the airline is suffering as a result of the Boeing 737MAX crisis. The airline has 13 737 MAX aircraft grounded with 43 more of the type on order.
It will be interesting to see if new changes in the airline’s direction come with the new ownership. It’s still too early to tell if this will lead to more expansion similar to what we’ve seen in recent years. What do you think? Should Air Canada be worried?