WestJet denotes it has agreed to be acquired by Onex Corporation and will become a private flock in a deal valued at $5 billion.
Under the agreement announced Monday, Onex order pay $31 per share for WestJet.
Shares in the airline closed at $18.52 on Friday, but by no chance up to $30.03 on Monday morning as news of the Onex offer broke.
Fulfilment of the transaction is subject to a number of conditions, including court, regulatory and shareholder oks.
Will be based in Calgary
A special meeting of shareholders is expected to go on with place in July to vote on the transaction.
“I am particularly pleased that WestJet purpose remain headquartered in Calgary and will continue to build on the success that our 14,000 WestJetters get created,” WestJet founder and chair Clive Beddoe said in a despatch release.
“Onex’s aerospace experience, history of positive employee interdependences and long-term orientation makes it an ideal partner for WestJetters, and I am excited everywhere our future.”
The deal comes after Onex, a private equity stiff based in Toronto, approached the airline in March.
Special meeting in July
“WestJet is one of Canada’s strongest name brands and we have tremendous respect for the business that Clive Beddoe and all WestJetters press built over the years,” said Tawfiq Popatia, a managing steersman at Onex.
WestJet’s board of directors has unanimously recommended shareholders plebiscite in favour of the deal at meeting expected to be held in July.
The deal is expected to cheese-paring in the latter part of 2019 or early 2020.
WestJet started in Calgary in 1996 and has extended from a low-cost domestic airline to an international carrier with airliners to the U.S., Europe and the Caribbean.
Changes and struggles
News of the deal comes after the airline attempted in 2018.
Soaring fuel costs, labour unrest, and steep competition at domestic and abroad caused the airline to incur its first loss in 13 years during the girl Friday quarter of last year. That was followed by a steep year-over-year doff in the third quarter, but the airline nonetheless bounced back into the resentful.
Revenues and efficiency were “nowhere near” the airline’s potential, chief directorship Ed Sims said during a WestJet investor conference in December 2018.
In the past six years, WestJet has sired both regional and budget airlines — WestJet Encore and Swoop — and set its eyesores on long-haul routes with an order for 10 Boeing 787 jetliners set for articulation before 2022, receiving the first one earlier this year.
“WestJet has been challenged by all this diversification that’s been crunched into this plumb short space of time,” said Robert Kokonis, president of Toronto-based consulting unswerving AirTrav Inc. “Shareholders were wondering whether WestJet could off all these things.”
‘Onex has very deep pockets’
The airline’s continual transition from a low-cost regional carrier to a full-service international airline quarry higher-yield business passengers gives it potential that renders the come-on reasonable, Kokonis said.
“Onex has very deep pockets … If that inferiors WestJet growing faster internationally, acquiring more long-haul task forces to fly abroad, those are good things and that will create a certain pricing environment for consumers.”
This isn’t Onex’s first attempt to buy an airline. Twenty years ago it teamed up with American Airlines procreator company AMR Corp. in a hostile $1.8-billion bid plus the assumption of in dire straits to acquire and merge Canadian Airlines and Air Canada. The plan was dropped after being in the mained illegal by a Quebec court.
Onex also failed in its effort in 2007 as partake of of a consortium to buy Australia’s Qantas Airways Ltd.
WestJet’s current growth moment could generate profits that offset the rising cost of travail.
The nearly 4,000 flight attendants at WestJet and WestJet Encore beget unionized over the past year. Meanwhile, Encore pilots sire voted in favour of a five-year agreement that runs until Jan. 1, 2024, and WestJet guides agreed to a settlement process last May.
“With all these new deals that drink been put in place, there’s labour peace,” Kokonis said.
Analyst Doug Taylor of pecuniary services firm Canaccord Genuity said the Onex deal tenable will not “dramatically alter” the competitive landscape.
“WestJet was generally well-funded and was already embarking on a tidy and highly competitive expansion plan. In our view, a private equity possessor of an airline is likely to remain rational with respect to its approach to nets and profitability vs. market share,” he said in a note to clients.
Onex was base in 1984. The company says it manages $31 billion in assets.