Onex Bid and Air Canada Takeover
On August 20, 1999, Air Canada proposed a financial offer to Canadian Airlines which would see Canadian's International routes and airport slots sold to Air Canada for an undisclosed amount. Canadian Airlines would be relegated to be a regional carrier providing a feeder network to Air Canada. This offer was rejected.
Four days later, on August 24, 1999, Onex Corporation announced a takeover bid for Air Canada, backed by American Airlines parent company AMR Corporation, consisting of $1.8B in cash and the assumption of $3.9B in debt. Canadian Airlines announced that it would support this and recommend acceptance from its shareholders. Air Canada rejected the offer. On August 31st, 1999, Air Canada adopted a poison pill aimed at thwarting any takeover bid.
It was later revealed by Kevin Benson that merger talks had occurred between Canadian Airlines and Air Canada in early 1999 with Air Canada abandoning the talks.
On October 19, 1999, Air Canada, backed by Star Alliance partners Lufthansa Airlines, United Airlines and CIBC announced a $930M counter bid to the Onex offer. Air Canada offered $92M for Canadian Airlines and committed to running it as a separate company. On November 2, Air Canada increased its offer to $16 per share to buy back 36.4 percent of the airline.
On November 5, 1999, a Quebec judge ruled that the Onex takeover was illegal, breaking the law that stipulates that no more than 10 percent of the company can be controlled by a single shareholder. Onex subsequently withdrew its offer and Air Canada stated it will proceed with the takeover of Canadian Airlines. On December 4, the board of directors at Canadian Airlines recommended the $92M offer from Air Canada to the shareholders. The offer from Air Canada originally expired at 5pm on December 7, 1999, but Air Canada extended their offer until December 23, 1999. Air Canada officially took control of Canadian Airlines, pending government approval, on December 8th, 1999. The Federal Competition Bureau cleared the way for the takeover on December 21, 1999 and Canadian Airlines officially became a subsidiary of Air Canada on December 23, 1999.
Canadian Airlines operated as a subsidiary company through most of 2000. In October 2000, all of Canadian Airlines' systems and employees became fully integrated. WIth both companies fully integrated, Air Canada began massive cuts to employees starting with the announcement that there would be 3500 cuts in the workforce on December 22, 2000. September 26, 2001 saw an additional 5000 cuts primarily driven from the worldwide impact to the travel sector caused by the 9/11 attacks.
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