WestJet Acquired By Private Equity Firm

Filed Under: Other Airlines

It has just been announced that WestJet is being acquired by Onex Corporation, which is a massive private equity firm. The transaction value is approximately $5 billion, including assumed debt.

This is an all-cash transaction, and under the terms, Onex will acquire all outstanding shares of WestJet for $31, meaning that WestJet will operate as a privately-held company That purchase prices represents:

  • A 67% premium to Friday’s closing share price
  • A 63% premium to WestJet’s 20-day volume-weighted average trading price

WestJet 787

WestJet’s Founder and Chairman had the following to say:

“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. 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’ 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.”

Tawfig Popatia, a Managing Director at Onex, had the following to say:

“WestJet is one of Canada’s strongest brands and we have tremendous respect for the business that Clive Beddoe and all WestJetters have built over the years. WestJet is renowned internationally for its unparalleled guest experience and employee culture. We’re thrilled to be partnering with WestJetters and continuing this remarkable Canadian success story.”

This is obviously a huge development for WestJet. The airline has been extremely popular with Canadian travelers for years, though has faced quite a few challenges recently:

WestJet 787 business class

Bottom line

This acquisition represents quite a nice premium for WestJet shareholders, though otherwise I’m generally suspicious of private equity firms coming in and changing up the business model of an airline.

It will be interesting to see what this means for WestJet’s future, especially given the different directions the airline is headed at the moment.

What do you make of Onex’s acquisition of WestJet?

Comments

  1. I work in PE, acquisitions are only done on a turnaround thesis and subsequent quick exit once the business is ‘fixed’. Expect to see big changes

  2. I echo Alex’s comments above …this is going to be interesting! Watch this space for sure

  3. all i can say is – GOOOOOOOOD luck

    cuz Onex is a specialist in LBO (wikipedia.org/wiki/Onex_Corporation), and the graveyard is littered in countless cases where the action of LBO was the trigger towards spiraling to point of no return.

    it’s not that WestJet was in perfect financial shape before, but any LBO brought on as part of the deal typically exacerbates existing FCF shortfalls exponentially.

  4. Yep. PE firms add value and then sell it at a higher price. The Canada air travel market still needs more liberalisation, however. It’s grossly inefficient and overpriced now

  5. Ahh rats, now I regret not investing more in WestJet last week. Oh well, still a good bit of change. Is that in USD or CAD?

  6. In terms of branching away from its former streamlined business model, Westjet also added its Encore subsidiary in 2013 which now operates 47 Bombardier Q400s to smaller markets in Canada. This was Westjet’s first move away from a pure 737 fleet.

  7. Looks like WestJet will go the way of Toys R Us and other famous private equity-financed success stories.

  8. I imagine Onex’s grand plan is to burden WestJet with an additional $5B in long-term debt (debt currently stands at $3B), pay out a bonanza “special dividend” of ~$2B from WestJet’s cash pile directly to Onex as a conquest fee, then either sell WestJet to another private equity firm for ~$5B or just let the company die on the operating table, unable to pay its mounting debts. Either way, Onex wins!

    WestJet really had some promise…787s to Europe were a potential driver of significant revenue growth, and they could’ve picked up a bunch of A220s to make their regional fleet more fuel efficient and modern. I’m not sure what Onex will mean for WestJet’s future plans, but let’s hope they can keep the ship headed in the right direction.

  9. Watch for massive crapification. I feel sorry for the employees and traveling public.

  10. I guess airlines can’t learn enough from Carl Icahn.
    But I guess WestJet has issues and 737MAX isn’t helping. This is probably the quick way out for WestJet investors.

    All I can comment,
    Bankruptcy is coming.
    WestJet flyers, prepare to be part of Air Canada.

  11. Interesting in that one of WestJet’s primary advertising tag lines has been “Owners Care” i.e. suggesting that WestJet employees go above and beyond because they are “owners” (given stock in the company as part of their compensation), which will no longer be the case, it seems.

  12. Interesting. PE buyouts can go either way. I do remember that samsonite struggled for a bit after it was bought. These days everyone seems to forget that. Anyway, good luck westjet

  13. Gerry Schwartz could hand Westjet over to his wife Heather Reisman. She could then change the name of the airline to indigo.

  14. Interesting in that one of WestJet’s primary advertising tag lines has been “Owners Care”
    Easy change: “ONEX Care”

  15. Chill. I am an ID with WJ and they are doing fine and will give AC a good kick in the butt. When the 787 starts flying to Asia this year that will make WJ even stronger.

Leave a Reply

Your email address will not be published. Required fields are marked *