Air Canada agreement with Star Alliance not yet applicable to Onex buyout proposal

Airline Industry Information, Oct 29, 1999

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

Air Canada has released a statement indicating that an agreement it has with members of the Star Alliance requiring a potential payout of CAD84m is not applicable to the Onex Corp buyout offer until shareholders approve a rights plan on 8 November. Onex Corp has accused Air Canada of doing a deal with Star Alliance partners that effectively amounts to a poison pill for the Onex Corp buyout offer. Air Canada has stated that its CAD930m counter proposal, which will see it acquire 35% of its own shares through financial backing from UAL, Lufthansa and the Canadian Imperial Bank of Commerce, is not dependent on the acquisition of rival carrier Canadian Airlines, but that it does require it to pay its Star Alliance partners up to CAD84m if Canadian Airlines continues its partnership in the rival oneworld airline partnership rather than joining the Star Alliance. Meanwhile, the Globe and Mail newspaper has reported that Onex Corp is planning to increase its bid for Air Canada by CAD2 per share.