Brian Dunn/MONTREAL
Air Canada has responded to attempts to merge it with Canadian Airlines by introducing a shareholder rights plan to be activated in the event of any takeover bid. It is also aiming to delay a vote on the merger plan until 7 January. Both strategies are aimed at defeating moves by American Airlines and investment group Onex to take over the carrier.
Toronto-based Onex responded to Air Canada's spoiling tactics by filing an application in the Ontario Superior Court to move the shareholders meeting to 8 November. The case was due to go to court early this week.
The Onex/American plan would see Air Canada exit the Star Alliance after being merged with Canadian, a founder member of the rival oneworld grouping and itself 33%-owned by the US major. Air Canada's 'poison pill' plan involves a one-for-one share offer, to be activated once an individual or group acquires 10% of either voting or non-voting shares.
Onex has described the Air Canada move as a "blatant effort" to circumvent Ottawa's recent 90-day suspension of competition legislation, aimed at allowing the carriers to restructure. Toronto-based analyst Ted Larkin of HSBC Securities says Onex would probably do the same if it was in a similar position, and says Air Canada chief executive Robert Milton has investment bankers working on alternative ways to increase shareholder value.
Ailing Canadian Airlines suggests Air Canada's stalling aims to put it in further financial difficulty; prior to the merger plan, Canadian had sought C$300-500 million just to survive. Industry analysts say Star is also looking at defending its corner through a cash infusion from United Airlines and Lufthansa, allowing Air Canada to buy outstanding shares or pay a shareholder dividend. If Ottawa eases foreign ownership restriction on airline ownership, a bidding war seems likely.
Source: Flight International
