Onex Withdraws Takeover Bid for Air Canada

Onex Corp. withdrew its bid to take over Air Canada and restructure Canada’s air industry, shortly after a provincial court ruled the proposal was illegal. The dramatic events left Air Canada victorious in staving off the hostile takeover attempt by Onex, which planned to merge it with rival Canadian Airlines to create a single national carrier. Air Canada shareholders were scheduled to vote Monday on whether to accept the Onex plan, but the Quebec Superior Court decision caused Onex Chairman Gerry Schwartz to halt the process. In his ruling, Justice Andre Wery said Onex’s proposal to convert its Air Canada voting shares to nonvoting shares temporarily while at the same time replacing the Air Canada directors was illegal. Onex had proposed the limited voting shares in an attempt to sidestep a federal law prohibiting any single party from owning more than 10% of a national airline. Air Canada had offered to buy back a large-enough bloc of shares to thwart the Onex bid. In Montreal, Air Canada President Robert Milton said the airline planned to proceed with its buyback plan and purchase of Canadian Airlines, which employs 16,000 people and reported last week its cash reserves were dangerously low at $60 million. Air Canada last traded at $7.06 on Nasdaq when trading was halted Friday.