Onex' Air Canada/Canadian Airlines merger bid found to be illegal

Airline Industry Information, Nov 9, 1999

AIRLINE INDUSTRY INFORMATION-(C) 1997-9 M2 COMMUNICATIONS LTD

On 5 November Onex Corp withdrew its proposal to acquire and merge Air Canada and Canadian Airlines after a Canadian provincial court found that the offer was illegal. The decision means Air Canada, which viewed the takeover bid as hostile, no longer has to place the bid before shareholders for their vote, as was scheduled to occur on 8 November. The chairman for Onex Corp said that though he was disappointed his company would accept the verdict. The part of the Onex offer that the court found illegal was Onex's proposal to temporarily convert its Air Canada voting shares into non- voting shares while at the same time replacing the Air Canada directors. The presiding judge apparently emphasised that 'this intervention is not an attempt to mingle in corporate affairs...rather, it aims at making sure for the future of the shareholders that (Onex's) offer is handled within the confines of existing laws.' Despite the withdrawal of a threatened takeover, Air Canada is apparently still intending to proceed with its proposal to buyback 34.6% of its own shares and to acquire Canadian Airlines according to the Associated Press. Air Canada was expected to mail its Issuer Bid Circular to shareholders on 5 November.