Air Canada Agrees to Sell 35 Percent of Aeroplan to Onex Corporation
Jan 27, 2003, 6:30 am
#1
Original Poster
Join Date: Nov 2000
Location: Toronto
Posts: 101
Air Canada Agrees to Sell 35 Percent of Aeroplan to Onex Corporation
Attention Business Editors:
Air Canada Agrees to Sell 35 Percent of Aeroplan(TM) to Onex Corporation
MONTREAL, Jan. 27 /CNW Telbec/ - Air Canada and Onex Corporation
announced today that they have entered into an agreement under which Onex will
pay Air Canada approximately $245 million for an investment in Aeroplan, a
wholly owned subsidiary of Air Canada. Onex will acquire a 35% equity interest
in Aeroplan and Air Canada will hold 65%. As part of the transaction, Air
Canada will hold a $200 million note payable by Aeroplan and Onex will hold a
$52.5 million note from Aeroplan. For Air Canada, the transaction values
Aeroplan and its related commercial agreements at $900 million. This value
could increase to $1.2 billion based on certain performance and other earn-
outs. The transaction, involving a private equity investor in a frequent flyer
program, represents a first in the airline industry. Air Canada will record a
significant accounting gain on its completion.
"We are very excited at the prospect of working in partnership with Onex
on Aeroplan, particularly in view of their proven track record of working with
large corporations to transform internal divisions into independent global
business leaders to increase profitability and build shareholder value," said
Robert Milton, President and CEO of Air Canada. "Air Canada's distinct ability
among worldwide carriers to sell an equity interest in one of its subsidiaries
during this difficult period for the airline industry confirms the value of
the Air Canada franchise," he added.
"We view Aeroplan as a gem within Air Canada," commented Gerald W.
Schwartz, Onex CEO. "We are pleased to have the opportunity to work with the
airline to build Aeroplan into a global leader in the growing loyalty
industry," he added, "and to achieve the kind of success, for all
stakeholders, that we have experienced with Sky Chefs and Celestica."
"The sale of an interest in Aeroplan is a milestone in Air Canada's
strategy of illuminating the value of its core assets through spin-offs and
positions us favourably as we continue to seek other liquidity enhancing
opportunities," said Calin Rovinescu, Executive Vice President, Corporate
Development and Strategy of Air Canada and Chairman of Aeroplan.
Under the terms of the agreement, proceeds to Air Canada could increase
from $245 million to $350 million if the full earn-out amounts are achieved.
Such value increase would be payable in cash or achieved through a dilution of
Onex' interest, after approximately two years. Onex will have representation
on Aeroplan's Board and approval rights over fundamental Aeroplan decisions.
The transaction is subject to due diligence, completion of final documentation
and certain other closing conditions, including the creation of security and
assurances regarding certain Aeroplan cash flows and the absence of any
material adverse change. It is expected to close at the end of the first
quarter.
"Today's announcement is great news for our more than six million
Aeroplan members, our employees and our partners. Together with Onex, we
intend to enhance the value of Aeroplan to its members. We are presently
working on opportunities for members to earn Aeroplan Miles across new
categories of their everyday spending and use their miles for great new
products such as Air Canada Vacations packages, Avis car rentals, Delta Hotel
stays and golf, skiing and entertainment packages." said Rupert Duchesne,
Aeroplan President and CEO.
Since its inception in 1984, Aeroplan has become Canada's premier loyalty
program with over six million members and a significant income generator for
Air Canada. In January 2002, Aeroplan became a wholly-owned subsidiary of Air
Canada. In 2002, Aeroplan generated cash revenue in excess of $600 million, of
which less than forty percent represented billings to Air Canada.
Approximately 1.4 million round-trips were redeemed for travel on Air Canada
and its worldwide Star Alliance partner airlines in the past year.
Aeroplan has more than 90 partnerships with airline, hotel, car rental,
financial, telecommunication, retail, services and entertainment partners. It
has a long-standing business relationship with CIBC, Canada's leading credit
card issuer and owner of Canada's premier gold credit card, the CIBC Aerogold
VISA card, which allows cardholders to earn one Aeroplan Mile for every one
dollar spent. Aeroplan also has a long-term partnership with Diners Club
Canada, the only travel and entertainment card to offer Aeroplan Miles.
In May 2002, Aeroplan won the distinction of being the world's Best
Frequent Flyer Program at the prestigious OAG (Official Airline Guide) Airline
of the Year Awards.
Onex Corporation is one of Canada's largest companies with global
operations in service, manufacturing and technology industries.
WEBCAST:
A conference call for analysts and media has been scheduled for 1:00 p.m.
EST today. It will be broadcast live over each of the Air Canada and Onex
websites as well as on www.newswire.ca
-30-
Air Canada Agrees to Sell 35 Percent of Aeroplan(TM) to Onex Corporation
MONTREAL, Jan. 27 /CNW Telbec/ - Air Canada and Onex Corporation
announced today that they have entered into an agreement under which Onex will
pay Air Canada approximately $245 million for an investment in Aeroplan, a
wholly owned subsidiary of Air Canada. Onex will acquire a 35% equity interest
in Aeroplan and Air Canada will hold 65%. As part of the transaction, Air
Canada will hold a $200 million note payable by Aeroplan and Onex will hold a
$52.5 million note from Aeroplan. For Air Canada, the transaction values
Aeroplan and its related commercial agreements at $900 million. This value
could increase to $1.2 billion based on certain performance and other earn-
outs. The transaction, involving a private equity investor in a frequent flyer
program, represents a first in the airline industry. Air Canada will record a
significant accounting gain on its completion.
"We are very excited at the prospect of working in partnership with Onex
on Aeroplan, particularly in view of their proven track record of working with
large corporations to transform internal divisions into independent global
business leaders to increase profitability and build shareholder value," said
Robert Milton, President and CEO of Air Canada. "Air Canada's distinct ability
among worldwide carriers to sell an equity interest in one of its subsidiaries
during this difficult period for the airline industry confirms the value of
the Air Canada franchise," he added.
"We view Aeroplan as a gem within Air Canada," commented Gerald W.
Schwartz, Onex CEO. "We are pleased to have the opportunity to work with the
airline to build Aeroplan into a global leader in the growing loyalty
industry," he added, "and to achieve the kind of success, for all
stakeholders, that we have experienced with Sky Chefs and Celestica."
"The sale of an interest in Aeroplan is a milestone in Air Canada's
strategy of illuminating the value of its core assets through spin-offs and
positions us favourably as we continue to seek other liquidity enhancing
opportunities," said Calin Rovinescu, Executive Vice President, Corporate
Development and Strategy of Air Canada and Chairman of Aeroplan.
Under the terms of the agreement, proceeds to Air Canada could increase
from $245 million to $350 million if the full earn-out amounts are achieved.
Such value increase would be payable in cash or achieved through a dilution of
Onex' interest, after approximately two years. Onex will have representation
on Aeroplan's Board and approval rights over fundamental Aeroplan decisions.
The transaction is subject to due diligence, completion of final documentation
and certain other closing conditions, including the creation of security and
assurances regarding certain Aeroplan cash flows and the absence of any
material adverse change. It is expected to close at the end of the first
quarter.
"Today's announcement is great news for our more than six million
Aeroplan members, our employees and our partners. Together with Onex, we
intend to enhance the value of Aeroplan to its members. We are presently
working on opportunities for members to earn Aeroplan Miles across new
categories of their everyday spending and use their miles for great new
products such as Air Canada Vacations packages, Avis car rentals, Delta Hotel
stays and golf, skiing and entertainment packages." said Rupert Duchesne,
Aeroplan President and CEO.
Since its inception in 1984, Aeroplan has become Canada's premier loyalty
program with over six million members and a significant income generator for
Air Canada. In January 2002, Aeroplan became a wholly-owned subsidiary of Air
Canada. In 2002, Aeroplan generated cash revenue in excess of $600 million, of
which less than forty percent represented billings to Air Canada.
Approximately 1.4 million round-trips were redeemed for travel on Air Canada
and its worldwide Star Alliance partner airlines in the past year.
Aeroplan has more than 90 partnerships with airline, hotel, car rental,
financial, telecommunication, retail, services and entertainment partners. It
has a long-standing business relationship with CIBC, Canada's leading credit
card issuer and owner of Canada's premier gold credit card, the CIBC Aerogold
VISA card, which allows cardholders to earn one Aeroplan Mile for every one
dollar spent. Aeroplan also has a long-term partnership with Diners Club
Canada, the only travel and entertainment card to offer Aeroplan Miles.
In May 2002, Aeroplan won the distinction of being the world's Best
Frequent Flyer Program at the prestigious OAG (Official Airline Guide) Airline
of the Year Awards.
Onex Corporation is one of Canada's largest companies with global
operations in service, manufacturing and technology industries.
WEBCAST:
A conference call for analysts and media has been scheduled for 1:00 p.m.
EST today. It will be broadcast live over each of the Air Canada and Onex
websites as well as on www.newswire.ca
-30-
Jan 27, 2003, 6:44 am
#2
FlyerTalk Evangelist
Join Date: Mar 2000
Location: Southern Alberta
Posts: 20,550
Jan 27, 2003, 10:00 am
#5
FlyerTalk Evangelist
Join Date: Nov 2002
Location: Chilling with penguins
Posts: 13,043
I like the part where Gerry says losing the bid was the luckiest thing that ever happened to Onex... I wonder if that done to rub it into Milton's face...
But, I really wonder how things would have been like if Onex had won the bid and that AC was part of OneWorld...
But, I really wonder how things would have been like if Onex had won the bid and that AC was part of OneWorld...
Jan 27, 2003, 12:56 pm
#6
Company Representative - Air Canada
Join Date: May 1999
Location: Canada
Posts: 24,215
Air Canada carves off Aeroplan stake
By TERRY WEBER
Globe and Mail Update
Air Canada said Monday it is selling 35 per cent of its Aeroplan frequent-flier program to Onex Corp. for about $245-million.
The deal, which comes three years after the two sides were locked in a bitter takeover battle for the carrier, leaves Air Canada with 65 per cent of the wholly owned subsidiary.
Speaking with analysts, Air Canada executives described Monday's deal as "an important next chapter in the re-engineering of Air Canada."
...
However, Mr. Rovinescu also said Air Canada has no intention at this point of becoming a minority shareholder in Aeroplan.
http://makeashorterlink.com/?D24142E33
By TERRY WEBER
Globe and Mail Update
Air Canada said Monday it is selling 35 per cent of its Aeroplan frequent-flier program to Onex Corp. for about $245-million.
The deal, which comes three years after the two sides were locked in a bitter takeover battle for the carrier, leaves Air Canada with 65 per cent of the wholly owned subsidiary.
Speaking with analysts, Air Canada executives described Monday's deal as "an important next chapter in the re-engineering of Air Canada."
...
However, Mr. Rovinescu also said Air Canada has no intention at this point of becoming a minority shareholder in Aeroplan.
http://makeashorterlink.com/?D24142E33
Jan 27, 2003, 1:05 pm
#7
Join Date: Mar 2000
Location: YVR
Posts: 9,999
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">"We are very excited at the prospect of working in partnership with Onex
on Aeroplan, particularly in view of their proven track record of working with
large corporations to transform internal divisions into independent global
business leaders to increase profitability and build shareholder value," said
Robert Milton, President and CEO of Air Canada.</font>
on Aeroplan, particularly in view of their proven track record of working with
large corporations to transform internal divisions into independent global
business leaders to increase profitability and build shareholder value," said
Robert Milton, President and CEO of Air Canada.</font>
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">However, Mr. Rovinescu also said Air Canada has no intention at this point of becoming a minority shareholder in Aeroplan.</font>
Jan 28, 2003, 10:53 am
#10
Join Date: Feb 2000
Location: Vancouver, British Columbia
Programs: BA GGL, FPC Plat, HH Diamond, IHG Amb
Posts: 3,372
If memory serves, this puts AC back at about the 900 million range for cash on hand, with about 400 million in notes coming due in the third quarter.
Jan 28, 2003, 2:08 pm
#11
Join Date: Dec 2002
Location: GRIMSBY, Ontario CANADA
Posts: 811
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by AC*SE:
If memory serves, this puts AC back at about the 900 million range for cash on hand, with about 400 million in notes coming due in the third quarter.</font>
If memory serves, this puts AC back at about the 900 million range for cash on hand, with about 400 million in notes coming due in the third quarter.</font>
They hope to close the Onex/AP deal in the first Q. Even if they close the deal by the end of February they will not get the cash until than and will have run through two of their worst months in terms of revenue.
They have selling off and leasing back as many planes as they can in order to boost the cash on hand. Soon they will be running our of planes/equipment to sell/lease back.