continued from previous post:
Air Canada launches court battle with Ottawa
Trying to fend off hostile takeover,
airline challenges suspension of competition rules
JACQUIE McNISH and HEATHER SCOFFIELD
The Globe and Mail
Tuesday, September 14, 1999
Toronto and Ottawa -- JACQUIE McNISH in Toronto
HEATHER SCOFFIELD in Ottawa
Air Canada is taking on the federal government in anunprecedented court action that challenges Ottawa's recentdecision to suspend certain provisions of the Competition Act temporarily in the airline industry.
In an application filed with the Federal Court of Canada in Montreal yesterday, Air Canada said a hostile airline merger proposal from Onex Corp. should undergo a standard merger review by the Federal Competition Bureau. Onex has said its proposal is exempt under the government's decision Aug. 13 to suspend airline competition rules for 90 days.
...Air Canada's action names the attorney-general, Onex, Canadian Airlines and AMR Corp. as respondents.
...Onex dismissed Air Canada's legal challenge as a delaying tactic.
...Legal experts said Air Canada's move yesterday marks the first time that the federal government has become ensnared in a courtroom takeover brawl. Ottawa had sought to foster a private-sector solution to Canadian Airlines' financial woes when it suspended competition rules last month to allow the two national airlines to negotiate freely a possible restructuring of the industry.
...Air Canada's legal officials said they favour the opportunity for both airlines to negotiate, but Onex has designed its bid in such a way that Air Canada is in effect prohibited from proposing a counteroffer with Canadian Airlines.
Under so-called lockup agreements with Onex, Canadian Airlines has little freedom to enter any negotiations with Air Canada or any other potential bidder.
"No other conditional agreement respecting Canadian is possible and therefore, other proposals cannot be brought forward under the Section 47 order," said Air Canada's Mr. Port.
Collenette denies he gave Onex information
Didn't disclose plans to suspend competition rules
HEATHER SCOFFIELD
Parliamentary Bureau
Tuesday, September 14, 1999
Transport Minister David Collenette is vehemently denying suggestions that he passed on information to Onex Corp. before telling the public he intended to suspend competition rules for the airline industry.
"We haven't had any contact with Onex on this issue, ever," Mr. Collenette's spokesman, Peter Gregg, said yesterday. "We didn't tell them anything."
Onex bought $43-million of Air Canada shares through two numbered companies in the months leading up to Mr. Collenette's decision on Aug. 13 to suspend competition rules for 90 days.
A spokesman for Toronto-based Onex said yesterday that the share accumulation is completely normal behaviour for a company gearing up to take over another company.
But critics say the buying activity suggests Onex knew well before the Aug. 13 announcement that Ottawa planned to suspend competition rules for the airline industry.
And such knowledge, the critics say, could have given Onex an unfair advantage over Air Canada shareholders and other potential shareholders.
And finally...
Collenette to blame for airline mess
ERIC REGULY
Tuesday, September 14, 1999
David Collenette, the Transport Minister, could have gone down in history as the man who played an important and impartial role in fixing the battered airline industry in the best interests of all Canadians. He could have been the referee of the airways, setting out the rules and ensuring no foul play as the airline industry came up for grabs. Instead, he seems destined to become known as the frontman of a government that turned its ostensible desire for a "market solution" into a highly political and cynical exercise.
... it certainly looked like the fix was in for Onex. The government knew (from Canadian Airlines) that Onex was preparing a bid and it appears Onex was aware that the government was prepared to suspend the competition rules. Onex bought $43-million of Air Canada stock in the month before Aug. 13. Would it have spent so much when it did if it knew the competition rules would be kept in place? While Mr. Schwartz has denied repeatedly that he had any advance talks with the government about his plans, the bid's minimum requirement was the suspension of competition rules. The offer, in fact, expires on Nov. 9, the day before the rules are to come back into force.
Mr. Collenette's mistake was failing to seize the opportunity to paint himself whiter than white when he announced the competition rules were tossed out the window. On Aug. 13, he did say the two airlines had requested exemption from the competition rules; he did not say that he was aware of a possible third-party bid. The omission meant that the sequence of events --government becomes aware of possible Onex bid, Onex buys Air Canada shares, Competition Act suspended, Onex bids -- looks like it was rigged to favour a company led by an old buddy of the Liberal Party. At the same time, the failure to set the record straight has backfired on Onex, which is still the only bidder for the two airlines, in the sense that it makes it look like Mr. Schwartz was dictating terms to the government.
Mr. Collenette's second mistake was not setting the rules of engagement from the onset. Because the Minister knew Onex was waiting in the wings, he would also have known that any number of companies would consider launching competing bids the moment Onex's intention was made public. Why not take the opportunity then to level the playing field? For example, he could have said that the Air Canada Public Participation Act, which prevents any one shareholder from owning more than 10 per cent of the airline, could be modified to allow majority ownership. This would have left the impression that the government was opening the field to as many potential bidders as possible while preventing Air Canada, which wants the 10-per-cent rule kept, from using it to preserve management jobs at the expense of shareholders. It was not until Friday, three weeks after Onex's bid was launched, that Mr. Collenette said publicly that the Air Canada ownership legislation was not necessarily cast in stone.
His third mistake was failing to calm the fears of consumers, most of whom have a genetic hatred of monopolies. ...Collenette barely mentioned the "public interest" when he ditched the competition rules last month, so he should not be surprised that travellers are terrified that they will have to pay more to fly from one province to the next than from Canada to Europe. All he had to do to suppress these fears was mention that no monopoly would go unregulated, that flights to far-flung cities and towns would not vanish and that fare caps might have to be put in place to prevent gouging on routes where no competition exists.
...As it is, Mr. Collenette did none of these things. The game looks rigged in Onex's favour and the travelling public is uneasy about the birth of a monopoly. He only has himself to blame.
There is a lot more stuff on the Globe and mail site, and also at the National post's site nationalpost.com. If any of you are having a hard time getting information on this check these sites out regularly.
Regards,
John Sladek |
