Shareholders of WestJet Airlines Ltd. have voted overwhelmingly in favour of a $3.5-billion takeover by Toronto-based Onex Corp., ending 23 years as an independent airline.
WestJet said more than 92 per cent of votes cast by Tuesday were in support of the deal reached with the Toronto-based investment company.
The per-share price of $31 is a discount from the $35.75 Onex proposed in March, before taking a close look at the company’s books. Citing uncertainties that included the grounding of WestJet’s Boeing 737 Max aircraft, Onex slashed its offer before the two sides agreed on the $31 offer jointly announced on May 13.
The deal is expected to close later this year, subject to approvals by the Canadian Competition Bureau, the Canadian Transportation Agency’s Canadian status determination and U.S. regulators. The transaction also requires final approval by the Court of Queen’s Bench of Alberta.
WestJet began flying in 1996 and went public at $10 a share three years later, branding itself as a no-frills, regional carrier infused with the spirit of the west.
WestJet has recently targeted Air Canada on international routes by adding wide-body planes, more overseas stops and premium fares. WestJet employs 14,000 people and has about 180 planes that serve more than 180 destinations.
But the expansion has hammered profits even as revenues rose. The bigger airline became saddled with higher costs and an increasingly unionized work force. For 2019, WestJet is expected to make per-share profit of $1.37, according to Bloomberg, less than half the $2.92 it earned in 2015.
WestJet chief executive Edward Sims has said the company’s strategy will be unchanged under Onex, and that the private-ownership model is a better structure for an airline that is required to make long-term plans that often look unfavourable when examined every three months.
The global grounding of the Boeing 737 Max passenger jet – of which WestJet has 13 – poses an additional problem. WestJet was forced to cancel routes, flights and delay the addition of some seasonal routes after federal Transport Minister Marc Garneau closed Canadian airspace to the plane model on March 13, which followed two fatal crashes that killed 346 people in Indonesia and Ethiopia.
The Max was to fly more than 1,200 WestJet departures in August, and WestJet said it has been able to use other planes to replace just 675 of these trips.
WestJet has dropped the Max from its schedule until Aug. 29, and will provide a better reckoning of the costs associated with the grounding when it reports second-quarter financial results on July 30.
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Eric Atkins