Transport Canada and WestJet’s shareholders have approved a new class of shares designed to improve WestJet’s access to foreign capital.
Patterned after a similar issue adopted last year by Air Canada, WestJet is dividing its common shares into two classes. One class may only be owned by Canadians, the other only by foreigners. Each share is worth one vote, but if the foreign-owned shares exceed 25% of all voting shares outstanding, the vote attached to each foreign share decreases proportionately, so that the total votes by all foreign shareholders can never exceed Canada’s 25% cap on foreign control of an airline.
Before this change WestJet could tap only overseas capital with offers of non-voting shares because foreigners already held the 25% maximum. Under this new arrangement WestJet may issue an unlimited number of variable voting shares for sale to foreigners.
But WestJet may face the same uncertainty that still hangs over Air Canada in the USA. Last October a US citizen complained that Air Canada was not a Canadian airline because non-Canadians hold a majority of its holding company’s shares. The US Department of Transportation agreed to investigate Air Canada’s ownership. It still has not reached a decision.
Source: Airline Business
