Pax Global Media
This story was updated on Wednesday, March 2 at 12:16 p.m. EST
WestJet and Sunwing announced on Wednesday (March 2) that they have reached a definitive agreement under which the WestJet Group will acquire Sunwing Vacations and Sunwing Airlines.
The news was first reported by media reports Wednesday morning and then later confirmed via press release.
The transaction will "bring together two Canadian travel and tourism success stories to deliver new travel options and greater value for travellers in the rapidly expanding leisure and work-from-anywhere travel markets," WestJet said in a news release.
WestJet’s controlling shareholder is Toronto-based Onex, which took WestJet private in 2019, just months before the COVID-19 pandemic hit.
The deal comes as the aviation industry attempts to recover losses brought on by the COVID-19 pandemic and the travel restrictions that followed.
According to the Globe and Mail, the companies’ tour businesses will be combined and headquartered in Toronto, while WestJet will run Sunwing’s airline from Calgary.
The two brands will be marketed separately and there will be no job losses during the takeover, Alexis von Hoensbroech, WestJet's new CEO, and Stephen Hunter, Sunwing’s CEO, said in a joint interview with the Globe.
Mr. Hoensbroech said the deal will allow WestJet to tap into a bigger market of Canadians seeking resort vacations during winter.
“We are complementing each other...in areas where we both are weak,” Mr. Hoensbroech told the Globe.
Both airlines are hiring as they prepare for travel's rebound.
“We have a lot of staff [who] have been here for a long time. So I have many sleepless nights thinking about how we’re going to get through this pandemic,” Mr. Hunter told the Globe. “Not only is it going to be okay because finally, our Prime Minister helped us out with his announcement a couple of weeks ago [on looser COVID-19 testing rules for travellers] and sales have been tremendously good for everybody across the sector. But ultimately this marriage will mean more jobs for Canadians.”
Following the close of the transaction, a new tour operating business unit will be created under the WestJet Group, to include both Sunwing Vacations and WestJet Vacations Inc. This will be led by Mr. Hunter, according to a news release.
Sunwing's current shareholders will become equity holders in the WestJet Group.
The WestJet Group of companies will expand to include Sunwing Airlines, the company said.
"This will add increased capacity, dedicating otherwise seasonal aircraft to operate year-round in Canada, instead of Sunwing supplementing seasonal demand with imported aircraft, which translates into more jobs for Canadians," WestJet said in a statement. "This acquisition will improve the WestJet Group's ability to offer more affordable fares by immediately expanding its low-cost footprint in Canada."
The value of the transaction, which is expected to close by the end of the year pending regulatory approval, hasn't been disclosed.
Mr. Hunter is optimistic the deal will receive a green light from regulators as it combines complementary businesses - an airline with strong ties to Western Canada with a tour operator that is based in Ontario and Quebec.
Airline takeovers in Canada are reviewed by the Competition Commissioner and Transport Canada, which report to the Transport Minister, who makes the final decision.
"This combination brings together Canada's two original low-cost carriers and positions us to accelerate growth in value-oriented travel, already the fastest growing segment of the airline market. It creates new opportunities for our people, our operational partners and supports the recovery from a global pandemic that has been particularly challenging for the Canadian travel and tourism industry including local airports and businesses we work closely with," said von Hoensbroech in a news release.
Mr. Hunter added: "We have a very promising future as part of The WestJet Group, which is one of the only airlines in the world that has not issued debt or equity during the pandemic, or accepted sector-specific government aid."
"The combination of their strong balance sheet and growth trajectory with Sunwing's unparalleled expertise in creating differentiated vacation packages will ensure the success of the new vacation division."
"My team and I are excited for the future, and we look forward to offering even more vacation destinations to Canadians at affordable prices."
Barclays is acting as lead financial advisor to WestJet, with additional advisory provided by Morgan Stanley & Co. LLC, Canaccord Genuity Corp and RBC Capital Markets, LLC. Goodmans LLP is acting as legal advisor to WestJet.
Sunwing says it expects to no longer require the pandemic-related Large Employer Emergency Financing Facility (LEEFF) Sunwing obtained from the Canadian government in early 2021, which will be fully repaid upon closing of the transaction.
The news comes more than one year after Mr. Hunter announced that he had received a takeover offer from an unnamed buyer.
Not long after, Sunwing's hotel division, Blue Diamond Resorts, signed an agreement with Marriott International that saw 19 properties become part of Marriott's Autograph Collection.
As a result, Sunwing Travel Group now benefits from Marriott’s worldwide distribution and partnership agreements in addition to the Marriott Bonvoy loyalty program, which is comprised of over 145 million members across the globe.
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