Onex to buy WestJet for $5 billion

Onex to buy WestJet for $5 billion

The deal, which has a value of $5 billion including debt, is expected to close in the latter part of this year or early next year.

Reaction is coming in from across Calgary after the news that WestJet was being sold to Onex. "WestJet stock prices after years of a quarter and quarter record results and the track record of profitability have all of a sudden hit hard times".

Onex offered $31 a share, a 67 per cent premium to the airline's closing price May 10.

"Since our first flight in 1996, WestJet has been singularly focused on providing better options for the Canadian travelling public and this transaction retains that commitment", said Clive Beddoe, WestJet's Founder and Chairman, in a statement.

Alberta's Premier said on Monday that WestJet and Onex have assured him the carrier's headquarters will remain in Calgary after the deal.

WestJet Chief Executive Ed Sims said on BNN that the deal will allow the company to execute on its long-term growth strategy without the constraints of quarterly scrutiny.

"WestJet is one of Canada's strongest brands and we have tremendous respect for the business", said Tawfiq Popatia, a managing director at Onex said in the statement.

"Onex has very deep pockets.If that means WestJet growing faster internationally, acquiring more long-haul fleets to fly overseas, those are good things and that will create a positive pricing environment for consumers".

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The huge premium is a signal, analysts say, that Canadian airlines have been persistently undervalued relative to firms in other countries and is a particularly positive sign for rival Air Transat, the Montreal-based airline which is now in sale talks. WestJet will then function as a privately-held company. The plan was dropped after being ruled illegal by a Quebec court. Onex was also part of a group that failed to buy Australia's Qantas Airways Ltd.in 2007.

Air Canada (AC.TO) and Transat A.T.

In addition to Pigeon, Vincent Chiara, president of real estate developer Groupe Mach, confirmed last week he has submitted an offer for the parent company of Air Transat, while Pierre Karl Peladeau, the president and CEO of Quebecor Inc., also confirmed last week he's requested a financial analysis of the company for a personal investment.

WestJet's current growth spurt could also generate profits that offset the rising cost of labour.

The almost 4,000 flight attendants at WestJet and WestJet Encore have unionized over the past year. Meanwhile, Encore pilots have voted in favour of a five-year agreement that runs until January 1, 2024, and WestJet pilots agreed to a settlement process last May, auguring "labour peace", Kokonis said.

"WestJet was generally well-funded and was already embarking on a large and highly competitive expansion plan". Montreal-based Letko Brosseau & Associates is the largest shareholder in both Air Canada and Transat AT, and the second largest in WestJet according to Bloomberg data, while Fairfax is the largest shareholder in Chorus Aviation.

Completion of the transaction is subject to a number of conditions, including court, regulatory and shareholder approvals.

A special meeting of WestJet shareholders is expected to be held in July to approve the transaction, which is expected to be completed by early 2020.

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