Here's the latest on the continuing saga of Onex takeover battle -
Wednesday October 27, 1:43 pm Eastern Time
Air Canada Reveals Stiff Penalties
TORONTO (AP) -- Air Canada disclosed Wednesday it would have to pay stiff penalties -- as much as $169 million in the first year alone -- if it leaves the Star Alliance of United Airlines and Lufthansa for rival Oneworld of American Airlines.
The penalty provision was part of a 10-year deal Air Canada signed last week with the Star Alliance to help fight off a hostile takeover bid by Onex Corp., one of Canada's largest companies.
Onex, which is backed by American Airlines, insists the penalties are a ``poison pill'' designed to thwart its offer to merge Air Canada with Canadian Airlines to create a single national airline linked with the Oneworld alliance.
Air Canada shareholders are scheduled to vote on the $1.2 billion Onex offer on Nov. 8. To try to block the takeover, Air Canada has offered a $628 million package that includes buying back 35 percent of the airline's shares at a premium price.
In a report to Canadian securities officials Wednesday, Air Canada for the first time revealed the penalties it would incur if Onex takes it over and breaks the agreement with the Star Alliance.
Air Canada said in the event it withdrew from the alliance, it agreed to pay liquidated damages to (United) and Lufthansa in amounts declining over a 10-year period. from a maximum of $169 million the first year to $25 million if it pulls out after January 1, 2009.
United Airlines and Lufthansa have offered financial backing worth more than $450 million for Air Canada's package, which includes the purchase of rival Canadian Airlines.
Air Canada has agreed to refund up to $57 million to United and Lufthansa if it cannot buy Canadian and bring it into the Star Alliance.
Onex is reportedly considering increasing its offer in response to the Air Canada package announced last week. The corporation controls a variety companies, including Sky Chefs airline catering, Lantic Sugar Ltd. and American Buildings Co.
http://biz.yahoo.com/apf/991027/canada_air_1.html
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Dan
"It is not doing the things we like to do, but liking the things we have to do, that makes life blessed." - Goethe