WestJet sold in deal valued at $5B

WestJet sold in deal valued at $5B

A pilot taxis a WestJet plane to a gate after arriving at Vancouver International Airport.

Under the terms of the agreement, Onex and its affiliated funds "will acquire all outstanding shares of WestJet for $31.00 per share". If completed, it would be the biggest private equity deal ever for an airline, according to Refinitiv data.

WestJet Airlines Ltd. announced the impressive transaction, which is valued around $5 billion, on Monday. Air Canada shares jumped 5.5 percent, while the broader Canadian stock index was down 1%. "This announcement has many workers very nervous about their future and anxious that the recent arbitrary changes the company has been making might only be the start of things to come", said Unifor Organizing Director Kellie Scanlan.

Even before the global grounding of Boeing's 737 MAX jets in March, WestJet's earnings had slipped as it worked to contain costs as its workforce unionized and was spending money on bold growth plans to expand worldwide travel, introduce first class cabins and launch a budget carrier called Swoop.

The deal comes as WestJet's share price and profitability have declined in recent years and Onex has yet to outline its plans for the carrier. American rival United Continental Holdings, the company that owns United Airlines, rose 28% in the same period.

"To me it looks like they're trying to capitalize on a situation where a company is a bit down and out because of the impact of launching a lot of initiatives that have yet to pay off, as well as the fallout from the pilot situation past year", he said.

The airline's board of directors then formed a special independent committee to review the proposal, which determined the deal was in the company's best interest.

"We are working with some dedicated and loyal WestJet frontline workers who know that by joining Unifor they can gain that voice at this pivotal time in the company's history". "You get $31, the shares go away, Onex has the shares".

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Other aerospace investments include Aerosystems, bought from Boeing in 2005 and sold in 2014, a stake in catering business Sky Chefs and a less successful investment in Hawker Beechcraft. "You can buy Onex shares on the open market, but they would no longer hold WestJet shares".

This isn't Onex's first attempt to acquire an airline.

The parent company of Montreal-based Air Transat has said it is in talks with more than one party regarding a potential transaction, although it is not yet clear what group might buy it.

WestJet (WJA.TO) said Onex (ONEX.TO) first approached it about the prospect of a takeover in March. The airline's board has urged shareholders to vote in favor.

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

"WestJet is renowned internationally for its unparalleled guest experience and employee culture", he said.

"We do not believe this transaction dramatically alters the competitive landscape, at least negatively", Canaccord Genuity analyst Doug Taylor said.

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