Star Alliance - LH & UA to buy into AC...thoughts?
Today was the first day it seemed to become a little more solid as to the 'rescue' planned for AC.
It seems LH and UA are each going to take a 10% share of AC and maybe the Bank of Montreal 15%.
What do you heavy flyers and shareholders of LH and UA think of this?
Oct 4, 99, 8:04 am
Kind of shoots down all of AC's arguments about the Onex deal. LH and UA would hold 20% to AA's 15% in the Onex structure. G&M says UA would take over reservations and other backroom services. LH would likely force AC to use SkyChefs (which it ironically co-owns with Onex). And Bank of Montreal would insert another financial institution (balancing the Quebes Caisse who already owns about 20% of AC's non-voting shares) into the structure to balance the Onex portion of that deal. And which, of course, makes AC's claims about a single shareholder breaking the 10% rule go out the door.
Seems one by one, AC is structuring a deal identical to everything they have been complaining about Onex's: foreign ownership and takeover of certain business activities, single shareholders holding more than 10%, foreign ownership block...
Question: What will they offer beleaguered shareholders like me. If Cdn is still flying, profits will remain depressed and the share price will return down to the $6.50-$7 level. How can a bank like BMtl involve itself in such a deal when the two airlines will continue to beat themselves senseless for another few years?
But this is only press speculation. Let's see what really emerges.
At least shareholders will finally be able to vote one way or the other on the Onex offer. Why is Milton and the board so afraid to let us have our say?
I still think management at AC is upset about finally having a major shareholder to be accountable to. They have escaped such accountability because of the cosy 10% limit. Those days are over, whichever scenario is adopted, and AC will be the better for it.
Oct 4, 99, 1:59 pm
You have overlooked the biggest difference (not counting pricing, which remains to be seen). The bid I see described here is for Air Canada alone, while Onex proposes to merge them with Canadian. And airline mergers rarely work, even when the two sides don't hate each other.
As a UA elite, I have to say that I am biased toward any action that results in Star Alliance retaining Air Canada or whatever becomes of Air Canada...
Oct 4, 99, 6:21 pm
If the UA/LH deal does not include support for Canadian, and is accepted by AC and shareholders, then it's pretty much a foregone conclusion that the feds will step in with support for CP. This will further suppress AC's stock, and probably surprise the hell out of LH and UA and any other investors that jump on board.
The myth of the "market solution" has finally been shown to be not wearing any clothes. Everyone that has been calling for a market solution, has also call for assurances that 1. prevent foreign control, 2. prevent price increases, 3. prevent layoffs, 4. prevent service redutions, 5. protect shareholders, etc, etc, etc,. Even those who have not called for these assurances, have made some pretty bizarre claims. One commentator remarked that they didn't want to see the Onex deal go through, because they preferred a market solution. Others have said CP should be denied bankruptcy protection (if it comes to that) so the "market" can have its way.
I stand by my assertion some time ago, that any "market solution" or "private sector solution" will be government mandated, government regulated, and most likely, government financed.
Welcome to Canada.