Air Canada today issued the following preliminary statement in response to Onex Corporation`s announcement of an amended bid to acquire Air Canada:
“In announcing its revised offer, Onex has effectively confirmed that its original bid was an attempt to acquire Air Canada through an inadequate offer,” said Robert Milton, Air Canada`s President and CEO. “Its revised offer is a direct result of Air Canada`s value-enhancing plan, but still does not appear to properly value Air Canada.”
Under the revised Onex/AMR Offer, Onex would still own approximately 31 percent of Air Canada and Air Canada shareholders would own approximately 59 percent or less (fully diluted) if they acquire the AMR shares through the rights offering announced by Onex. This compares to Air Canada shareholders owning 100 percent of Air Canada under the Air Canada plan (90 percent fully diluted).
Under the revised Onex/AMR Offer, the gross cash outlay to Air Canada shareholders is approximately $1.1 billion, but assuming shareholders take up the rights on the AMR shares at a cost of approximately $324 million, the net cash to Air Canada shareholders is only $776 million. This compares to approximately $800 million under the Air Canada plan.
Star Alliance provides significantly higher operating and net income to Air Canada than would Oneworld, as Air Canada does much more direct flying with Star Alliance than it would with Oneworld. The Onex/AMR Offer would deprive Air Canada shareholders of this benefit.
Under the Air Canada plan, Air Canada will incur no additional debt. By contrast, Onex`s revised bid requires an additional $300 million, in addition to taking on the debt load of Canadian Airlines and additional costs to fund its borrowing.
While Onex has copied many of the benefits of the Air Canada plan, its bid still appears not to properly value Air Canada and is still illegal. “Stripped of its accompanying rhetoric, the revised Onex Offer is not a dramatic increase in value for shareholders. And I still do not believe that it reflects the true value of one of the world`s great airline franchises, which under our plan, remains widely held by the existing shareholder base,” said Mr. Milton.
Under its revised offer, Onex would still be in breach of the 10 percent ownership limit. Accordingly, Air Canada will continue its proceedings in Quebec Superior Court challenging the legality of the Onex Offer. “Also, Onex has indicated that it intends to take up the shares of Air Canada whether or not it receives Competition Bureau approval. Their ability to do this is highly doubtful, and in any event, this raises the question of whether the acquisition of Air Canada has always been the primary intention of Onex/AMR,” said Mr. Milton.
The Air Canada Board will review the amended Onex offer when it becomes available and will provide further comment.