WestJet to be sold in friendly deal to Onex Corp. for $5 billion

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WestJet to be Acquired by Onex

Post by JBI » Mon May 13, 2019 5:18 am

All amounts in Canadian dollars unless otherwise stated

CALGARY, Alberta, May 13, 2019 (GLOBE NEWSWIRE) -- WestJet Airlines Ltd. (“WestJet”)(TSX: WJA) announced today it has entered into a definitive agreement that provides for its acquisition in an all-cash transaction. Under the terms of the agreement, Onex Corporation (“Onex”)(TSX: ONEX) and its affiliated funds will acquire all outstanding shares of WestJet for $31.00 per share, after which WestJet will operate as a privately-held company. The purchase price represents a 67% premium to Friday’s closing share price and a 63% premium to WestJet’s 20-day volume-weighted average trading price. The transaction value is approximately $5 billion including assumed debt.

“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. “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. Onex’ aerospace experience, history of positive employee relations and long-term orientation makes it an ideal partner for WestJetters, and I am excited about our future.”

“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. WestJet is renowned internationally for its unparalleled guest experience and employee culture. We’re thrilled to be partnering with WestJetters and continuing this remarkable Canadian success story,” said Tawfiq Popatia, a Managing Director at Onex.

Ed Sims, WestJet’s President and Chief Executive Officer, said, “We are delighted to continue the journey of building an airline based on a growing network, providing competitive airfares and more choice to, from and within Canada, for communities large and small. Integral to this relationship is a commitment to our employees, and our unique ownership-driven culture.”

The investment will be led by Onex Partners, Onex’ private equity platform focused on larger investment opportunities.

Recommendation of the WestJet Board of Directors

Following an approach by Onex in March 2019, the WestJet board of directors formed a special committee of independent directors to provide the Board with its advice and recommendations with respect to the proposal from Onex and the transaction, and to supervise the negotiation of the terms and conditions of the transaction. After an extensive review of the proposed transaction, the special committee provided its unanimous recommendation of the transaction to the WestJet board of directors. The WestJet board of directors, having received and considered the recommendation of the special committee, determined that the transaction is in the best interests of WestJet and unanimously recommends that WestJet shareholders vote in favour of the transaction at the special meeting of shareholders to be held to approve the transaction.

Each of CIBC Capital Markets and BofA Merrill Lynch has provided the WestJet board of directors with an opinion to the effect that, as of May 12, 2019, the consideration to be received by holders of WestJet shares in the transaction was fair, from a financial point of view, to such holders, in each case subject to the respective limitations, qualifications, assumptions and other matters set forth in such opinions.

Each of the directors and executive officers of WestJet has entered into a voting support agreement pursuant to which each has committed to vote in favour of the transaction.

Additional Transaction Details

Equity financing will be led by Onex Partners.

The transaction is to be completed by way of an arrangement under the Business Corporations Act (Alberta). Completion of the transaction is subject to a number of conditions, including court and shareholder approval and receipt of certain regulatory approvals, including approval under the Canada Transportation Act. The approval under the Canada Transportation Act involves a determination by the Minister of Transport which entails an assessment of the public interest as it relates to national transportation. Assuming the timely receipt of regulatory approvals, the transaction is expected to close in the latter part of 2019 or early 2020.

WestJet expects to mail an information circular in late June 2019 for a special meeting of its shareholders expected to be held in July 2019 to approve the transaction.

The arrangement agreement for the transaction includes customary provisions relating to non-solicitation, subject to customary “fiduciary out” provisions that entitle WestJet to consider and accept a superior proposal if the purchaser does not match the superior proposal. WestJet has agreed to pay a fee to the purchaser upon the termination of the agreement in certain circumstances. The purchaser has agreed to pay a fee to WestJet if, after all other conditions to the closing of the transaction have been satisfied or waived, the purchaser is not in a position to fund the closing of the transaction.

WestJet is permitted to continue paying its regular quarterly cash dividend consistent with its dividend policy and past practice until closing.

Further details regarding the terms of the transaction are set out in the arrangement agreement, which will be publicly filed by WestJet under its profile at www.sedar.com. Additional information regarding the terms of the arrangement agreement and the background of the transaction will be provided in the information circular for the special meeting of shareholders.

Advisors

CIBC Capital Markets is acting as financial advisor to WestJet. BofA Merrill Lynch has provided financial advisory services to the WestJet board of directors. Blake, Cassels & Graydon LLP is serving as legal advisor to WestJet and Norton Rose Fulbright Canada LLP is serving as independent legal advisor to the special committee of WestJet’s board.

Goodmans LLP is acting as Canadian legal advisor to Onex and Fried, Frank, Harris, Shriver & Jacobson LLP is serving as U.S. legal advisor to Onex. DLA Piper (Canada) LLP is serving as Onex’ aviation regulatory counsel. Barclays is acting as lead financial advisor and lending bank to Onex with additional advisory and financing provided by Morgan Stanley and RBC Capital Markets.

Caution Regarding Forward-looking Information

Certain information set forth in this news release including, without limitation, WestJet’s and Onex’ management’s expectations with respect to: the anticipated benefits of the transaction; the anticipated timing for the special meeting to approve the transaction; the timing and anticipated receipt of required regulatory approvals; and the anticipated timing for closing the transaction, is forward-looking information within the meaning of applicable securities laws. Forward-looking information may in some cases be identified by words such as “will,” “anticipates,” “expects,” “intends” and similar expressions suggesting future events or future performance.

By its nature, forward-looking information is subject to numerous risks and uncertainties, some of which are beyond WestJet’s and Onex’ control. The forward-looking information contained in this news release is based on certain key expectations and assumptions made by WestJet, including expectations and assumptions concerning the anticipated benefits of the transaction and the receipt, in a timely manner, of regulatory, shareholder and court approvals in respect of the transaction.

Forward-looking information is subject to various risks and uncertainties which could cause actual results and experience to differ materially from the anticipated results or expectations expressed in this news release. The key risks and uncertainties include, but are not limited to: general global economic, market and business conditions; governmental and regulatory requirements and actions by governmental authorities; relationships with employees, customers, business partners and competitors; and diversion of management time on the transaction. There are also risks that are inherent in the nature of the transaction, including failure to satisfy the conditions to the completion of the transaction and failure to obtain any required regulatory and other approvals (or to do so in a timely manner). The anticipated timeline for completion of the transaction may change for a number of reasons, including the inability to secure necessary regulatory, court or other approvals in the time assumed or the need for additional time to satisfy the conditions to the completion of the transaction. As a result of the foregoing, readers should not place undue reliance on the forward-looking information contained in this news release concerning the timing of the transaction. A comprehensive discussion of other risks that impact WestJet can also be found in WestJet's public reports and filings which are available under WestJet's profile at www.sedar.com.

Readers are cautioned that undue reliance should not be placed on forward-looking information as actual results may vary materially from the forward-looking information. WestJet does not undertake to update, correct or revise any forward-looking information as a result of any new information, future events or otherwise, except as may be required by applicable law.

About WestJet

Together with WestJet’s regional airline, WestJet Encore, we offer scheduled service to more than 100 destinations in North America, Central America, the Caribbean and Europe and to more than 175 destinations in over 20 countries through our airline partnerships. WestJet Vacations offers affordable, flexible vacations to more than 60 destinations and the choice of more than 800 hotels, resorts, condos and villas. Members of the WestJet Rewards program earn WestJet dollars on flights, vacation packages and more. Members use WestJet dollars towards the purchase of flights and vacations packages to any WestJet destination with no blackout periods, and have access to Member Exclusive fares offering deals to WestJet destinations throughout our network and those of our partner airlines.

WestJet is proud to be recognized for three consecutive years as Best Airline in Canada (2017-19) and awarded among travellers’ favourite Mid-Sized Airlines in North America (2019). From 2017-2018, WestJet was also awarded among travellers’ favorite Mid-Sized and Low-Cost Airlines in North America. The airline was also recognized among the Economy Class winners in North America, 2018. All awards are based on authentic reviews from the travelling public on TripAdvisor, the world’s largest travel site. We are one of very few airlines globally that does not commercially overbook.

WestJet is publicly traded on the Toronto Stock Exchange (TSX) under the symbol WJA. For more information about everything WestJet, please visit www.westjet.com.

Recent recognition includes:

2019/2018/2017 Best Airline in Canada (TripAdvisor Travellers’ Choice awards for Airlines)

2019 Winner Among Mid-Sized Airlines in North America (TripAdvisor Travellers’ Choice awards for Airlines)

2018/2017 Winner Among Mid-Sized and Low Cost Airlines – North America (TripAdvisor Travellers’ Choice awards for Airlines)

2018 Winner – Economy, North America (TripAdvisor Travellers’ Choice awards for Airlines)

2018 Number-One-Ranked Airline Credit Card in Canada (Rewards Canada)

2018 North America's Best Low-Cost Airline (Skytrax)

2018/2017/2016 Canada's Most Trusted Airline (Gustavson School of Business at the University of Victoria)

Connect with WestJet on Facebook at facebook.com/westjet

Follow WestJet on Twitter at twitter.com/westjet

Follow WestJet on Instagram at instagram.com/westjet

Subscribe to WestJet on YouTube at youtube.com/westjet

Read the WestJet blog at blog.westjet.com

For further information: To contact WestJet media relations, please email media@westjet.com.

About Onex

Founded in 1984 and headquartered in Canada, Onex manages and invests capital in its private equity and credit platforms on behalf of investors from around the world. In total, Onex has US$31 billion of assets under management, including US$6.6 billion of shareholder capital. Onex invests through its two private equity platforms, Onex Partners for larger transactions and ONCAP for middle market and smaller transactions, and Onex Credit which manages primarily non-investment grade debt through collateralized loan obligations, private debt and other credit strategies. Onex and its experienced management team are collectively the largest investors across Onex’ platforms.

The Onex Partners and ONCAP businesses have assets of US$51 billion, generate annual revenues of US$31 billion and employ approximately 172,000 people worldwide. Onex shares trade on the Toronto Stock Exchange under the stock symbol Onex. For more information on Onex, visit its website at www.onex.com. Onex’ security filings can also be accessed at www.sedar.com.
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WestJet to be sold in friendly deal to Onex Corp. for $5 billion

Post by Woxof38 » Mon May 13, 2019 5:37 am

https://globalnews.ca/news/5270077/west ... onex-corp/

Onex Corp. has signed a friendly deal to buy WestJet Airlines Ltd. in a deal it valued at $5 billion, including assumed debt.

Under the agreement, Onex will pay $31 per share for WestJet, which will continue to operate as a privately held company.
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Re: WestJet to be Acquired by Onex

Post by tbaylx » Mon May 13, 2019 5:37 am

Well now, that just became interesting. :shock:
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Re: WestJet to be Acquired by Onex

Post by stickontheice » Mon May 13, 2019 5:53 am

Good thing we are certified and have a collective agreement that includes our options.
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Re: WestJet to be sold in friendly deal to Onex Corp. for $5 billion

Post by sullecpt » Mon May 13, 2019 6:12 am

Guess they arent buying Transat?

What happens to Swoop?
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Re: WestJet to be sold in friendly deal to Onex Corp. for $5 billion

Post by TheStig » Mon May 13, 2019 6:22 am

With a Market Cap of 2.1B Westjet was under valued, seems like a smart purchase.

Congrats to everyone holding shares. I'm sure there will be many more questions than answers but I'm curious to see how this affects the airlines long term plans (ie Swoop and International expansion). Westjet has always touted its ESOP as a pillar of its success, what will replace it now that it's privately held?
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Re: WestJet to be Acquired by Onex

Post by SJPFTW » Mon May 13, 2019 6:29 am

stickontheice wrote:
Mon May 13, 2019 5:53 am
Good thing we are certified and have a collective agreement that includes our options.
News says the company will also be taken private, curious how the employee share program will work going forward since stocks will not be traded anymore or if it will just cease to exist.
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Re: WestJet to be Acquired by Onex

Post by tbaylx » Mon May 13, 2019 6:39 am

SJPFTW wrote:
Mon May 13, 2019 6:29 am
stickontheice wrote:
Mon May 13, 2019 5:53 am
Good thing we are certified and have a collective agreement that includes our options.
News says the company will also be taken private, curious how the employee share program will work going forward since stocks will not be traded anymore or if it will just cease to exist.
There aren't any public shares left once the company goes private, so the share program will come to an end and some other alternative/replacement will have to be found.

ONEX buys companies, fixes them up and sells them for a profit. Westjet has been trying to be everything to everybody. If i was a betting man I'd say ONEX takes Westjet back to it's core profitability model and sells off the extras like Swoop, Encore, 767's etc. Going to be an interesting next few years.
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Re: WestJet to be sold in friendly deal to Onex Corp. for $5 billion

Post by '97 Tercel » Mon May 13, 2019 6:47 am

Does this mean Clive won't have his name painted on the side of an airplane? :roll:
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Re: WestJet to be Acquired by Onex

Post by altiplano » Mon May 13, 2019 6:59 am

That's exactly what Onex will do... the sum of the parts are worth more than the price of the whole...
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Re: WestJet to be sold in friendly deal to Onex Corp. for $5 billion

Post by goingnowherefast » Mon May 13, 2019 7:25 am

Privately owned companies can still have employee stock options. I know of at least one (non aviation) company that does it. Rules are a little more complicated, but it's still viable.

Hopefully they see the mess that is swoop and kill it before it wastes more money.
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Re: WestJet to be sold in friendly deal to Onex Corp. for $5 billion

Post by tbaylx » Mon May 13, 2019 7:28 am

goingnowherefast wrote:
Mon May 13, 2019 7:25 am
Privately owned companies can still have employee stock options. I know of at least one (non aviation) company that does it. Rules are a little more complicated, but it's still viable.

Hopefully they see the mess that is swoop and kill it before it wastes more money.
If I was an employee holding shares i'd be selling them this morming with the jump. If the government or competition bureau kills the deal they'll be back at $18 in a heartbeat.
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Re: WestJet to be sold in friendly deal to Onex Corp. for $5 billion

Post by complexintentions » Mon May 13, 2019 7:36 am

goingnowherefast wrote:
Mon May 13, 2019 7:25 am
Hopefully they see the mess that is swoop and kill it before it wastes more money.
Or they could go the other way and focus on expanding Swoop with its lower cost base. Which strikes me more as exactly what buyout specialist companies like Onex do - merge coincident operations and cut the highest cost ones.

Investors recognize this is Onex's forte, which is another reason the stock spiked.

Get ready to go lean and mean! :mrgreen:
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Re: WestJet to be Acquired by Onex

Post by Diadem » Mon May 13, 2019 7:47 am

tbaylx wrote:
Mon May 13, 2019 6:39 am
ONEX buys companies, fixes them up and sells them for a profit. Westjet has been trying to be everything to everybody. If i was a betting man I'd say ONEX takes Westjet back to it's core profitability model and sells off the extras like Swoop, Encore, 767's etc. Going to be an interesting next few years.
So they're going to abandon their highly-profitable Hawaiian routes out of everywhere but Vancouver, and lose all the connecting passengers Encore moves onto the jets, just to return to an outdated business model that was created when Canadian Airlines still existed?
tbaylx doesn't have the best track record with these kinds of predictions, and he has a vested interest in Swoop being shut down to protect his own job. Take his statements with a grain of salt.
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Re: WestJet to be Acquired by Onex

Post by Red1 » Mon May 13, 2019 7:59 am

I would take the opposite view. Onex is well funded company and according to BNN has grown most of their companies with a long term vision of making them more profitable.
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Re: WestJet to be Acquired by Onex

Post by ahramin » Mon May 13, 2019 8:00 am

I guess we know who one of the interested Transat buyers is.
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Re: WestJet to be Acquired by Onex

Post by cloak » Mon May 13, 2019 8:01 am

I believe great opportunity beckons at WestJet!

Onex is a solid investment firm with lots of experience and cash to develop all segments of WestJet to its full potential of a world class airline, and develop the partnership with Delta. Onex has been interested in managing a major Canadian airline which was blocked by Air Canada; and now it has an opportunity to demonstrate that vision and know-how in direct competition with it. WestJet will provide for a much better platform to execute that vision for many reasons. It is smaller and has far less labour issues, it is at the beginning of its real international growth, it has solid presence in the leisure market and it knows how to make a profit. And Onex has even more investment experience now. This can be a mutually beneficial highly profitable marriage.
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Re: WestJet to be Acquired by Onex

Post by Fanblade » Mon May 13, 2019 8:03 am

[

AC went through this 15 years ago with a hedge fund. Cerberus.

A highly leveraged purchase left on the companies balance sheet.

Break up the company into pieces. In AC’s case it was Air Canada, Aeroplan, Air Canada maintenance, Air Canada Vacations, Air Canada ground services, Jazz.

Sell the pieces. Saddle parent company with well above normal contracts in order to get higher sales price for pieces. Pieces left to sink or swim on their own.

IPO parent company

Sale proceeds for IPO and pieces go to hedge fund.

Cerberus and ACE made huge profits. They left everyone else with a decade of pain.
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Last edited by Fanblade on Mon May 13, 2019 8:10 am, edited 3 times in total.

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Re: WestJet to be Acquired by Onex

Post by tps8903 » Mon May 13, 2019 8:08 am

tbaylx wrote:
Mon May 13, 2019 6:39 am
SJPFTW wrote:
Mon May 13, 2019 6:29 am
stickontheice wrote:
Mon May 13, 2019 5:53 am
Good thing we are certified and have a collective agreement that includes our options.
News says the company will also be taken private, curious how the employee share program will work going forward since stocks will not be traded anymore or if it will just cease to exist.
There aren't any public shares left once the company goes private, so the share program will come to an end and some other alternative/replacement will have to be found.

ONEX buys companies, fixes them up and sells them for a profit. Westjet has been trying to be everything to everybody. If i was a betting man I'd say ONEX takes Westjet back to it's core profitability model and sells off the extras like Swoop, Encore, 767's etc. Going to be an interesting next few years.
I'm sure JBI will be able to offer more insight to the ESP issue. But my understanding is that the there is language protecting the CA on sale of the company which means the ESP is protected. So I will hazard a guess that the ESP will be converted to Onex shares on closing of the deal with the current ESP being cashed out.

If they want to remove or replace the ESP with a non equivalent ESP option they will have to reopen the CA or at a minimum have a LOU with ALPA regarding the replacement. James?
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Re: WestJet to be Acquired by Onex

Post by Old fella » Mon May 13, 2019 8:16 am

In my 70 yrs of living and reading/hearing about many acquisitions over the years , one common theme is always evident- there will be changes. Good/bad/indifferent, who can say at this point, however overall some people will win, others will loose. It always happens.
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Re: WestJet to be Acquired by Onex

Post by Duke Point » Mon May 13, 2019 8:22 am

cloak wrote:
Mon May 13, 2019 8:01 am
I believe great opportunity beckons at WestJet!

Onex is a solid investment firm with lots of experience and cash to develop all segments of WestJet to its full potential of a world class airline, and develop the partnership with Delta. Onex has been interested in managing a major Canadian airline which was blocked by Air Canada; and now it has an opportunity to demonstrate that vision and know-how in direct competition with it. WestJet will provide for a much better platform to execute that vision for many reasons. It is smaller and has far less labour issues, it is at the beginning of its real international growth, it has solid presence in the leisure market and it knows how to make a profit. And Onex has even more investment experience now. This can be a mutually beneficial highly profitable marriage.
That's the spirit!!!

Unfortunately as a private entity, you will have no idea what Gerry's ultimate goal is. A wise investor usually looks at extracting current value FIRST, rather than dumping money in....especially in aviation.

I'm betting on breaking it up and selling off the pieces as the business model of "permanent growth" to build share value is unsustainable in the Canadian market. My bet includes re-branding, separating and selling off, much like what happened with AC.

Interesting times ahead for sure.

DP.
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Re: WestJet to be Acquired by Onex

Post by tbaylx » Mon May 13, 2019 8:28 am

Diadem wrote:
Mon May 13, 2019 7:47 am
tbaylx wrote:
Mon May 13, 2019 6:39 am
ONEX buys companies, fixes them up and sells them for a profit. Westjet has been trying to be everything to everybody. If i was a betting man I'd say ONEX takes Westjet back to it's core profitability model and sells off the extras like Swoop, Encore, 767's etc. Going to be an interesting next few years.
So they're going to abandon their highly-profitable Hawaiian routes out of everywhere but Vancouver, and lose all the connecting passengers Encore moves onto the jets, just to return to an outdated business model that was created when Canadian Airlines still existed?
tbaylx doesn't have the best track record with these kinds of predictions, and he has a vested interest in Swoop being shut down to protect his own job. Take his statements with a grain of salt.
You're missing the point. You don't have to own Encore in order to have a feeder. Air Canada doesn't own Jazz yet they have a regional feeder network via capacity purchase. The same is viable for Westjet. Sell off Encore for a tidy sum then contract a capacity purchase agreement just like they do with PASCO back to Encore. Makes them much more flexible with capacity. Same as Air Canada does.

I have no interest whatsoever in Swoop remaining or being shut down. It isn't going to affect my job one way or another. I'd argue the Westjet pilots are far more interested in shutting down Swoop given the recent comments on here.

In any case it's going to generate some changes at the Westjet group. In the meantime congrats to all the shareholders who made out like bandits if they take advantage and sell this morning.
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Re: WestJet to be Acquired by Onex

Post by rudder » Mon May 13, 2019 8:32 am

cloak wrote:
Mon May 13, 2019 8:01 am
I believe great opportunity beckons at WestJet!

Onex is a solid investment firm with lots of experience and cash to develop all segments of WestJet to its full potential of a world class airline, and develop the partnership with Delta. Onex has been interested in managing a major Canadian airline which was blocked by Air Canada; and now it has an opportunity to demonstrate that vision and know-how in direct competition with it. WestJet will provide for a much better platform to execute that vision for many reasons. It is smaller and has far less labour issues, it is at the beginning of its real international growth, it has solid presence in the leisure market and it knows how to make a profit. And Onex has even more investment experience now. This can be a mutually beneficial highly profitable marriage.
Where do you think the $3.5B in cash is coming from? No doubt that some (or all?) will be debt. There will be new debt servicing costs for ONEX. That requires cash flow from operations.

I would watch for asset divestiture and laser focus on the bottom line at the new ONEX subsidiary of WJA.
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Re: WestJet to be sold in friendly deal to Onex Corp. for $5 billion

Post by goingnowherefast » Mon May 13, 2019 8:49 am

Isn't swoop only cheap because they're piggybacking on WJ? Discount planes, contract mx. "Borrow" all the expensive stuff from big brother to look cost effective on paper.

ULCCs in Europe have ultra modern fleets so operating costs and fuel consumption are low. Except for swoop and the rest of Canada, ULCCs get old worn out equipment.

Onex executives will hopefully see through the smoke and mirrors.
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Re: WestJet to be Acquired by Onex

Post by cloak » Mon May 13, 2019 8:54 am

rudder wrote:
Mon May 13, 2019 8:32 am

I would watch for asset divestiture and laser focus on the bottom line at the new ONEX subsidiary of WJA.
And which asset would that be, the one that competes with/bothers you?!! You would like that, wouldn't you?!

Not only is it possible, rather quite likely, that Onex may be doing things differently than happened at Air Canada, not necessarily to demonstrate what opportunity they missed, but also really develop the product for its full potential first and then weigh its options. It's good investment.
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