Air Canada has filed a challenge with the Canadian Transportation Agency (CTA) regarding WestJet Airlines Ltd.'s acquisition by Onex Corp.
READ MORE: 92.5% vote in favour of WestJet's Onex transaction
WestJet and Onex entered into a definitive agreement on May 12, 2019, for the proposed acquisition of WestJet by Onex under a plan of arrangement, pursuant to which each outstanding share of WestJet will be exchanged for $31 in cash subject to the terms and conditions of the Arrangement Agreement, following which WestJet will operate as a privately-held company.
Following a meeting with WestJet stakeholders back in July, more than 92.5 per cent of shareholders and optionholders voted in favour of the proposed transaction.
On Aug. 14, The Canadian Competition Bureau granted unconditional approval for WestJet's proposed transaction with Onex Corporation by issuing a no-action letter.
The transaction is expected to close in the fourth quarter of 2019.
A breach of federal rules?
According to The Canadian Press, Air Canada's letter alleges that if the proposed transaction goes through, WestJet will breach federal rules that limit foreign ownership of carriers.
As it stands, the CTA mandates that at least 51 per cent of its voting interests must be owned and controlled by Canadians, and no single non-Canadian can own or control, directly or indirectly, more than 25 per cent of the voting interests in that corporation (either individually or in affiliation with another person).
In addition, no more than 25 per cent of the voting interest in a Canadian carrier is owned by foreign air carriers (either individually or in affiliation).
In a statement to PAX, the CTA confirmed that it did, in fact, receive a letter from Air Canada, saying:
"The Canadian Transportation Agency (CTA) is continuing its review of the proposed transaction, as required by the Canada Transportation Act. Under the Act, the CTA is responsible for ensuring that all carriers that have to meet the Canadian ownership requirements are owned and controlled “in fact” by Canadians.
The process undertaken by the CTA ensures that at least 51 per cent of its voting interests is owned and controlled by Canadians.
The CTA is aware of the issues raised in Air Canada’s letter. The process underway will allow the CTA to determine whether the proposed transaction will result in an undertaking that is Canadian."
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