CALGARY – Onex Corp.’s $5-billion acquisition could reshape Canada’s airline industry and bring in Air Transat in its fold at a later date, according to analysts.
Toronto-based private equity giant and asset manager Onex is taking Calgary’s WestJet Airlines Ltd. private in a deal worth $31 per share or $5 billion, including debt, that represents a massive 63 per cent premium over WestJet’s share price over the last 20 days. WestJet’s stock shot up 60 per cent on the news to $29.66 on the Toronto Stock Exchange.
“We are delighted to continue the journey of building an airline based on a growing network, providing competitive airfares and more choice to, from and within Canada, for communities large and small,” WestJet president and CEO Ed Sims said in a release.
The huge premium is a signal, analysts say, that Canadian airlines have been persistently undervalued relative to firms in other countries and is a particularly positive sign for rival Air Transat, the Montreal-based airline which is currently in sale talks.
The Onex/WestJet deal is also the most high-profile example of a trend playing out in the sector — of private equity companies buying stakes in Canadian airlines.
“Relative to other industrials, the entire Canadian airline space in incredibly undervalued,” AltaCorp Capital analyst Chris Murray said, noting that WestJet had also been undervalued due to “issues of its own making.”
Onex approached WestJet with a proposal in March to buy the company through its private equity firm Onex Partners. The WestJet board, which includes founder and chair Clive Beddoe, voted unanimously in favour of the deal.
It’s possible but highly unlikely that another strategic buyer or private equity firm will emerge with a competing offer for WestJet, said analyst Scott Chan of Canaccord Genuity.