WestJet to be Acquired by Onex

Old May 13, 19, 6:20 am
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WestJet to be Acquired by Onex

CALGARY, May 13, 2019 /CNW/ - 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.

https://www.newswire.ca/news-release...847792523.html
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Old May 13, 19, 6:57 am
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Wow, there goes "We are owners and we care" tag line. Business like Onex are not long term owners, typically they will own it for less than 5 years. During their ownership, the focus is on increasing profit so they can resell the business for much higher price down the road. I guess the turmoil with all the changes (which in my opinion) have been poorly implemented. Oh well, I will watch the turmoil continue.
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Old May 13, 19, 6:59 am
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No need to return to Westjet now....sticking with AC.
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Old May 13, 19, 7:03 am
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I certainly didn't see that coming!!
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Old May 13, 19, 7:07 am
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As this is a friendly takeover, it won’t fundamentally change the organization structure or compensation package to employees. Onex has also been trying to buy a major airline since the Canadian / Air Canada merger, so they may not just be in it for the short term. They may also be the conduit to selling 49% to Delta and/or other major airlines.
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Old May 13, 19, 7:18 am
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Ugh. I guess time will tell but this deal is disappointing to me. Private equity firms are notorious for buying companies, restructuring them to maximize profit, and then selling them again in about a 5-year investment window. WestJet is profitable but I can see Onex shifting WestJet away from more interesting and risky routes towards their more traditional LCC business model. I wonder how much this will impact WestJet's shift to a full-service carrier, and how much capacity now moves to YYZ as a result. They've really invested in YYC.
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Old May 13, 19, 7:50 am
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An interesting twist indeed and I can't help but think this doesn't bode well for the union-management relations.
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Old May 13, 19, 8:01 am
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Originally Posted by tcook052 View Post
An interesting twist indeed and I can't help but think this doesn't bode well for the union-management relations.
With the way things are currently, can it get any worse?? Time will tell. Not a done deal until the end of this year, or sometime next year. You have to wonder if current negotiations will drag on, or come to a quick conclusion before the deal is finalized.
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Old May 13, 19, 8:01 am
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Originally Posted by tcook052 View Post
An interesting twist indeed and I can't help but think this doesn't bode well for the union-management relations.
Yes, not good for the employees however the unions are usually not supportive of the "we are owners" mentality. This moves WestJet closer to what unions are use to having.
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Old May 13, 19, 8:07 am
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Originally Posted by aerobod View Post
As this is a friendly takeover, it wonít fundamentally change the organization structure or compensation package to employees.
Says who? While the takeover may be classified as friendly, that's a mere distinction in the nature of the transaction (i.e. how much money and whose hands that money is being doled out to). Once acquired, Onex can do whatever they want with the company, laying off workers, reducing salaries, etc. The only thing WS has going for them now is their labour Union. At the end of the day Onex bought the company because they thought they would turn a profit from the company either by holding the company (keeping the structure the same), improving the organization (i.e. eliminating redundancies) and/or selling the company at a later time.

Originally Posted by YXUFlyboy View Post
Ugh. I guess time will tell but this deal is disappointing to me. Private equity firms are notorious for buying companies, restructuring them to maximize profit, and then selling them again in about a 5-year investment window. WestJet is profitable but I can see Onex shifting WestJet away from more interesting and risky routes towards their more traditional LCC business model. I wonder how much this will impact WestJet's shift to a full-service carrier, and how much capacity now moves to YYZ as a result. They've really invested in YYC.
That's always a potential risk with takeovers. I would also point out that given Onex spent so much money on the takeover I fail to see how they would have money left over to focus on route expansion and fleet upgrades. This is to say nothing of the lack of lounges they have network wide and the dismal quality of their front cabin in comparison to AC. The company's success, and the success of many airlines is inversely correlated with the success of YYC. High oil prices are bad for the airlines who are now seen as geniuses in this low energy price market which as we know won't last forever.

However, there may be a silver lining to this development. Perhaps Onex will make WS fares competitive once and for all rather than be priced $10 cheaper than the comparable AC fare. For the longest time I have avoided flying them since the $10 savings in airfare was often minimal compared to the *Gold benefits I got flying AC (i.e. lounge access, IRROP handling, etc.). Here's to hoping we once and for all see $90 fares between YXU and YUL! Perhaps new management will see the light in having WS join an alliance like SkyTeam instead of their current sorry state which can leave travellers stranded on complex itineraries ticketed with them.

Originally Posted by tcook052 View Post
An interesting twist indeed and I can't help but think this doesn't bode well for the union-management relations.
I always thought WS was a non-Union shop that just gave their employees decent labour conditions... boy was I wrong! One thing that is missing from the discussion is whether the Competition Bureau would approve the transaction on these grounds specifically. I suspect WS shareholders have no objections to this offer
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Old May 13, 19, 8:32 am
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Originally Posted by aerobod View Post
As this is a friendly takeover, it wonít fundamentally change the organization structure or compensation package to employees. Onex has also been trying to buy a major airline since the Canadian / Air Canada merger, so they may not just be in it for the short term. They may also be the conduit to selling 49% to Delta and/or other major airlines.
I would think WS relationship with Delta will most likely end, unless Delta add a lots more value to WS. This would be because of Onex close ties to American Airlines. Also, I can now see WS joining One World or Skyteam depending who WS ties up with in the States.
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Old May 13, 19, 8:33 am
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Originally Posted by aerobod View Post
As this is a friendly takeover, it won’t fundamentally change the organization structure or compensation package to employees.
As an employee of a company (in a completely different industry), that was taken over in a friendly takeover with the promise of "no fundamental changes" I call BS. If things do stay the same, it'll only be in the short term.

EDIT - I'm not saying that there will be major changes. I'm just saying that a friendly take-over is by no means a guarantee that things will stay the same.

Last edited by YEG USER; May 13, 19 at 8:39 am
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Old May 13, 19, 8:43 am
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Originally Posted by 5mm View Post


I would think WS relationship with Delta will most likely end, unless Delta add a lots more value to WS. This would be because of Onex close ties to American Airlines. Also, I can now see WS joining One World or Skyteam depending who WS ties up with in the States.
The Onex tie up with American was all about the Canadian / Air Canada purchase in 1999, I donít think there has been any specific engagement with them since then. I can see Onex making it easy for Delta to purchase 25% for $2bn, with potential carving off of Swoop and possibly Encore to other parties, although with Encore being an integral part of feed to mainline, that may not make sense. Onex are not airline specialists and WestJet wasnít in trouble from a financial perspective, so it makes sense to generally keep the existing Exec and execute the plan that is in place with some tweaks to maximize the Onex investment.
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Old May 13, 19, 8:45 am
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Originally Posted by j2simpso View Post
However, there may be a silver lining to this development. Perhaps Onex will make WS fares competitive once and for all rather than be priced $10 cheaper than the comparable AC fare. For the longest time I have avoided flying them since the $10 savings in airfare was often minimal compared to the *Gold benefits I got flying AC (i.e. lounge access, IRROP handling, etc.). Here's to hoping we once and for all see $90 fares between YXU and YUL!
Does WS have the operational margins to do this? I donít think they do, unless they start cutting services and Onex takes WS back to itís roots of a low cost airline.
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Old May 13, 19, 8:53 am
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Originally Posted by 5mm View Post


I would think WS relationship with Delta will most likely end, unless Delta add a lots more value to WS. This would be because of Onex close ties to American Airlines. Also, I can now see WS joining One World or Skyteam depending who WS ties up with in the States.
Onex has no signficant ties with AMR except historical and as a business I don't believe those connections carry any current weight.

While a takeover by Onex could be seen in negative terms there is also the fact that Private ownership gets away from the 1/4 by 1/4 focus and allows for potentially better long-term investment in re-making WestJet. Whether that effort stays on the current path or radically changes direction is the main question and all the thoughts here are so far entirely speculative. Onex has held some investments for many years and some for short periods - given the varied history, it is impossible to know what Onex's intents may be in this case.
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