Air Canada came confronting the proposed deal of Onex Corp to acquire WestJet Airlines on the basis of that deal is not in compliance with the country’s ownership regulations, Air Canada wrote in its letter to the Canadian Transportation Agency (CTA).
Toronto-based Onex is in plans of going into a buying out deal to purchase Calgary-based WestJet for C$3.5 billion ($2.6 billion), for which it has get a go ahead from the shareholders as well as from some regulators, but CTA is still reviewing the acquisition deal whether is it aligned with the protective ownership laws of the country.
Regulations in Canada restrict foreigners’ ownership in a Canadian airline up to 49% of the equity, and further impose restriction upon foreign airline or any single owner of foreign nationality from having control of more than 25% of voting interests in a local airline.
In its letter dated August 15 to CTA, Air Canada argued that with the presence of foreign wealth funds and carriers as co-investors in Onex and due to the “opaque nature” of the deal to acquire WestJet through Onex’s subsidiary Kestrel Bidco will make it difficult for the proposal to be fully compliant with ownership laws.
The suppleness and ambiguity arising from the presence of Onex’s co-investor participating in the process raises the risk of non-Canadian co-investors to have actual control of the WestJet after the conclusion of the proposed deal, Air Canada said.
Air Canada declined Reuters request to comment on the letter, but CTA commented that it is already aware of the issues that Air Canada has been concerning over and conveyed to the agency in its letter.
Going through the process will help the CTA to sort out whether the proposed transaction in question will finally result in an acquisition by Canadian, the agency said in its email.
As per the terms of the deal that was announced in May, acquisition of WestJet by Onex is to be concluded by late this year or early next year.