Brian Dunn/MONTREAL
The Onex investment group has improved its takeover offer for Air Canada in response to Star Alliance's bid to keep the carrier in the airline grouping, but there appears to be no quick end in sight to the Canadian airline industry's nine-week old merger battle.
Onex raised its bid for the Canadian flag carrier to C$13 ($8.85) a share from C$8.25, taking its total offer to C$2.1 billion. The new bid tops last month's offer from Lufthansa and United Airlines, which was itself higher than the original Onex offer.
Air Canada says it will continue to challenge the legality of the hostile Onex bid - made in conjunction with oneworld alliance heavyweight American Airlines and which would merge it with Canadian Airlines - in the Quebec Superior Court.
Air Canada claims the Onex plan would violate a federal law aimed at keeping the airline out of the hands of one dominant shareholder, although its challenge could be compromised by moves from Canadian transport minister David Collenette to raise a 10% cap on single shareholders. Air Canada says a change of policy is only "hypothetical".
The carrier's president and chief executive, Robert Milton, says the revised Onex offer proves that its original bid "was an attempt to acquire Air Canada through an inadequate offer". He adds that under Air Canada's own plan to buy back its shares the airline would incur no additional debt, whereas the new Onex bid requires an additional C$300 million, in addition to the assumption of Canadian's debt plus the extra borrowing costs.
Several fund managers say the sweetened Onex bid will be difficult for Air Canada to top, and that it may be high enough for Air Canada shareholders to accept. Air Canada shares were trading at C$10.50 before trading was halted for the Onex announcement.
"In the absence of an Air Canada counter-offer, it looks interesting for Air Canada shareholders," says Mark Mettrick of Standard & Poors in Toronto. "Shareholders may feel there is far less uncertainty if they stick with Air Canada. Onex hasn't indicated how it will pay for the cash portion of its offer."
Source: Flight International
