The proposed $3.5-billion acquisition of WestJet Airlines by an affiliate of Onex Corp. moved a step closer to completion after the Canadian Transport Agency determined the airline will continue to meet Canadian ownership and control requirements. The CTA said this week that the Calgary-based airline and its discount subsidiary Swoop would remain Canadian if Onex amends its bylaws to ensure any matters voted on by the board of directors are done with a majority of Canadian directors being present.
It notes that Onex chairman and chief executive Gerry Schwartz holds at least 60 percent of the voting interest in the company and is in a position to exercise voting control over Onex, including at shareholders’ meetings.
“In light of the foregoing, the agency finds that only Mr. Schwartz, a Canadian, will have the means to exercise control in fact over Onex and is satisfied that Onex will be controlled in fact by Canadians should the proposed transaction be executed as filed,” it said in a seven-page decision.
The company will, through subsidiary Kestrel Holdings Inc. have voting control of Kestrel Topco Inc., which will ultimately own and control WestJet and Swoop Inc., the CTA added.
Onex said it is pleased to have received approval from the minister of Transport and the Competition Bureau for the WestJet transaction.
The CTA said that the requirement to be Canadian is an ongoing requirement and that the agency must be notified of any change to its status.
Onex requested on May 31 that the agency to make an advance determination if WestJet and Swoop continued to meet Canadian ownership and control requirements.
In September, Air Canada challenged WestJet’s acquisition by Onex, arguing in a filing to the country’s transportation regulator the deal breaches federal rules that limit foreign ownership of carriers.
Federal legislation limits foreign ownership of a Canadian airline to 49 percent, with a maximum of 25 percent for any one foreign investor. Onex, which managed $23.2 billion of invested capital as of Dec. 31, is a private equity firm whose funds include cash from foreign investors.
Shareholders approve acquisition
WestJet shareholders approved the proposed acquisition in July, with 92.5 percent voting in favour. The same month, an Alberta court approved the deal, which Onex and WestJet expect to complete following further regulatory green lights later this year.
Shareholders won’t be receiving a quarterly dividend this month because the deal closed before Dec. 18.
The airline’s board of directors had declared a 14 cents per share dividend on Oct. 28 to be paid on Dec. 31 to shareholders of record next week.
Onex says its portion of the total equity investment is about $345 million as a limited partner and largest investor in Onex Partners V. It declined to disclose further terms of the transaction.
WestJet shareholders will receive $31 in cash for each share and the shares will be delisted from the Toronto Stock Exchange within a few trading days.