Paul Lewis/WASHINGTON DC
Star Alliance leaders Lufthansa and United Airlines have sought to fend off a hostile bid for partner Air Canada by bankrolling a C$892 ($597 million) counter-offer. Though the deal would also see Canadian Airlines taken over by the flag carrier, the smaller airline would remain a separate entity and would be invited to ally with Delta Air Lines, which is establishing its own alliance with Air France, as well as with Star members.
Star's move aims to fend off a takeover-cum-merger plan launched by investment house Onex with the aid of American Airlines parent AMR, a oneworld ally of Canadian. The Star offer requires AMR to surrender its 25% stake in Canadian and to cut management links.
The two Star heavyweights and the Canadian Imperial Bank of Commerce (CIBC) would take a non-voting 10% interest in Air Canada, which would use C$800 million of the funds to buy back 35% of its stock at C$12 a share and the rest to acquire struggling Canadian at C$2 a share.
United and Lufthansa financing would be in the form of C$230 million in convertible airline stock and a 10-year C$310 million line of credit, topped up by a C$190 million sale and lease-back on three new Airbus A330s by United and C$200 million from CIBC in return for a credit card agreement.
Air Canada says the deal is far better than the AMR offer. It would see 2,500 job losses at Canadian rather than the 5,000 of the rival proposal. Unlike the AMR deal, which would give it a 15% holding in the merged carriers, Lufthansa and United's smaller stakes would require no change in ownership laws.
Onex has dismissed the Star move as a "blocking manoeuvre", claiming 80% of funding would come from overseas in exchange for "unexplained control, influence and benefits". While the Star bid tops the C$8.25 Onex offer for Air Canada, its 35% - as opposed to 100% - ceiling means fewer shareholders would benefit.
Source: Flight International
