Calgary-based airline WestJet has agreed to be sold to Onex Coroporation in an all-cash deal worth $5 billion, the company announced Monday.
“Under the terms of the agreement, Onex Corporation and its affiliated funds will acquire all outstanding shares of WestJet for $31 per share, after which WestJet will operate as a privately-held company,” reads a press release.
WestJet shares closed at $18.52 on Friday.
The transaction value is approximately $5 billion, including assumed debt.
“Since our first flight in 1996, WestJet has been singularly focused on providing better options for the Canadian travelling public and this transaction retains that commitment,” Clive Beddoe, WestJet’s founder and chairman, said in a statement.
“I am particularly pleased that WestJet will remain headquartered in Calgary and will continue to build on the success that our 14,000 WestJetters have created.
“Onex’s aerospace experience, history of positive employee relations and long-term orientation makes it an ideal partner for WestJetters, and I am excited about our future.”
WestJet’s board of directors formed a special committee of independent directors to provide advice after being approached by Onex in March 2019.
The committee unanimously endorsed the sale.
A number of conditions have to be met before the sale can be finalized, including court and shareholder approval and receipt of regulatory approvals, including approval under the Canada Transportation Act.
A special meeting of WestJet shareholders is expected to be held in July to approve the transaction, which is expected to be completed by early 2020.
The announcement came as a surprised to many, including Calgary-based airline analyst Rick Erickson, who said he was "dumbfounded" when he heard the news.
“There was nothing in the works whatsoever that would give you any kind of hint or indication this was going to happen," he said.
"I was at the WestJet AGM just last week here in Calgary and nothing ... Nobody said a word about this, so it has come completely out of the blue.”
Erickson called Onex a "major global player" when it comes to investment.
"They like to buy companies that are either undervalued or in some kind of difficult circumstance, turn them around and then re-sell them. And they do so for a profit, they don’t do this for a hobby," he said.
“As we know, WestJet has got quite a bit of development change going on, they’re buying these 787 global aircraft, they’re moving toward a global network player, they’ve got Swoop, their ultra low-cost carrier, they’ve got a business class product coming onto their flights. We have lots of growth going on regionally within Canada, in the U.S. market too, and international.”
