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16 May 2019, 03:57 | Hattie Nash
WestJet to be sold to Onex Corporation in $5B deal
"WestJet has been challenged by all this diversification that's been crunched into this very short space of time", said Robert Kokonis, president of Toronto-based consulting firm AirTrav Inc.
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.
Popatia said the new foreign ownership threshold - raised to 49 per cent from 25 per cent after amendments to the Canada Transportation Act - "had nothing to do with" its decision, stating that Onex Partners - the company's flagship private equity fund - is the sole equity provider.
Onex has not yet spelled out its plans for WestJet, which has marketed itself as an airline where customers are treated well because employees are incentivized through opportunities for stock purchases and profit-sharing to take control of situations and solve problems. It bought Spirit AeroSystems from Boeing Co in 2005 and exited its investment in 2014 after making $3.2 billion.
This isn't Onex's first attempt to acquire an airline.
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WestJet has been sold and the company fetched quite the haul.
WestJet is Canada's second-biggest airline, competing with Air Canada. The stock closed up almost 60 per cent or $11.09 at $29.61 on Monday. American rival United Continental Holdings, the company that owns United Airlines, rose 28% in the same period.
Onex is buying WestJet and taking it private.
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.
Onex could "ultimately look" to also acquire Transat to "complement WestJet's offering", wrote Desjardins analyst Benoit Poirier in a note to clients. The airline's board has urged shareholders to vote in favor.
"WestJet is renowned internationally for its unparalleled guest experience and employee culture", he said.
"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". The company says that assuming the timely receipt of regulatory approvals, they expect the transaction to go through in the latter part of 2019 or early 2020.
Taylor, the Canaccord Genuity analyst, said the Onex acquisition would not dramatically alter the competitive landscape.
CIBC Capital Markets and BofA Merrill Lynch were the financial advisers to WestJet, while Barclays, Morgan Stanley and RBC Capital Markets advised Onex.
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