Sunwing Receives Takeover Offer

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DHC-1 Jockey
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Sunwing Receives Takeover Offer

Post by DHC-1 Jockey »

https://www.theglobeandmail.com/busines ... -ceo-says/

Sunwing Travel Group has received a takeover offer for its airline division from an unnamed suitor.

Stephen Hunter, chief executive of Sunwing, said a non-disclosure agreement with the would-be buyer prevents him from providing details, but more information should be available in the coming weeks. “We have been approached recently,” Mr. Hunter said in an interview.

Sunwing is a conglomerate: Along with Sunwing Airlines, it operates 45 resorts in Mexico and the Caribbean, tour providers, a luxury charter jet service, and other vacation and hotel brands. The group is 51-per-cent owned by the family of Mr. Hunter and employs about 3,000 people in Canada. Germany-based tourism and airline company TUI Group owns 49 per cent.

Mr. Hunter said the integrated and interdependent nature of Sunwing’s divisions – the travel companies, resorts and airline – complicate the prospect of any sale.

“The airline is a vehicle in order to get our package customer from point A to point B. So our airline really is the cost department within our tour operator. And therefore, one really can’t go without the other,” he said. “And of course, Sunwing vacations provides about 30 per cent of the customers to our own hotels.”

Mr. Hunter said he also fielded a takeover offer “years ago” from a party he declined to name. WestJet Airlines Ltd. and Sunwing have held talks in the past, said an airline executive The Globe and Mail is not naming because they are not authorized to speak publicly. It is not clear whether the recent bid is from WestJet or another company.

The source said it is in Sunwing’s best interest to disclose its airline has a potential buyer, as this demonstrates the value of the whole company to lenders.

Bargain-hunting private equity funds are selectively investing in the airline industry during the pandemic, in expectation of a rebound once vaccination programs kick in and travel picks up.

In October, aircraft lessor and operator Chorus Aviation saw its share price jump 30 per cent after the Halifax-based company said it received a “preliminary, non-binding acquisition proposal from a third party.” Analysts said a private equity firm likely made the offer. Chorus has not made any further announcements on the proposal.

WestJet did not immediately respond to e-mailed questions.

In good times, Canada’s airline market is dominated by Air Canada, followed by Onex Corp.-owned WestJet, Sunwing and Transat.

The prospect of Sunwing bought by WestJet would pose a new challenge to the Canadian government as it mulls the Air Canada-Transat deal. Canada’s Competition Commissioner last year said the deal would limit competition and consumer choice and drive up airfares.

The European regulator, which is required to rule on the proposal owing to the large market share of Air Canada and Transat, suspended its investigation into the deal in late December as it awaits more information from the companies.

WestJet, in submissions to the Canadian government on the Air Canada-Transat deal, called for the takeover to be rejected or modified to reduce the combined companies’ market grip.

In contrast, Mr. Hunter of Sunwing recently told The Globe he supports the deal because a larger Air Canada will be better positioned to fend off foreign rivals.

Sunwing recently tapped federal financing worth as much as $375-million under the Large Employer Emergency Financing Facility program. It is the first Canadian carrier to tap the program, as other airlines have borrowed from banks and on credit markets.

Mr. Hunter said the new liquidity will help the company as it awaits a sector-specific bailout from Ottawa. Like Transat and Air Canada Rouge, Sunwing Airlines has suspended its normal operations until April 30 because of the pandemic.
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tbaylx
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Re: Sunwing Receives Takeover Offer

Post by tbaylx »

Well either Onyx has some serious big balls doubling down, or AC is ditching Transat or maybe it's Peladeau? In any case the industry is going to look a lot different in 2022 than it did in 2019.

Interesting times.
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Re: Sunwing Receives Takeover Offer

Post by rudder »

If SWG divested of the airline, it would need to hire that airline to provide a significant portion of its lift. It would be a complete departure from the ‘vertically integrated’ concept. The value for the purchaser would be the guaranteed revenue stream from the resulting long term commercial agreement.

SWG would get cash up front, but then be forced to pay a markup on its lift. It would be a challenge to recoup the extra expense in the typically small margin packaged vacation market.

I cannot help but think that this is a party that believes SWG is cash strapped.
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Re: Sunwing Receives Takeover Offer

Post by DHC-1 Jockey »

rudder wrote: Fri Feb 05, 2021 6:00 pm I cannot help but think that this is a party that believes SWG is cash strapped.
Even though Sunwing just got a $375 million loan? Yes, it has high interest rates, but that cash should be enough to carry the company forward for a few years at least and return to profitability.

They didn't go from 1 airplane 15 years ago to upwards of 40 in peak season, let alone building a huge hotel and real estate portfolio without printing their own money left and right.
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Re: Sunwing Receives Takeover Offer

Post by digits_ »

rudder wrote: Fri Feb 05, 2021 6:00 pm If SWG divested of the airline, it would need to hire that airline to provide a significant portion of its lift. It would be a complete departure from the ‘vertically integrated’ concept. The value for the purchaser would be the guaranteed revenue stream from the resulting long term commercial agreement.

SWG would get cash up front, but then be forced to pay a markup on its lift. It would be a challenge to recoup the extra expense in the typically small margin packaged vacation market.

I cannot help but think that this is a party that believes SWG is cash strapped.
Makes sense. If the sale goes through, it would probably be a bad sign about the Sunwing group's financials. It doesn't make sense to sell off the airline. Unless they get a huge amount of money for it, which is highly unlikely in these times.
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Re: Sunwing Receives Takeover Offer

Post by seriousflyer »

Does anybody know if there has been any consolidation in the industry in North America? Or in the world ?

Most airline companies don't have cash or credit to buy another airline, as most are busy trying to save their companies.

However anything is possible with a good loan, available labour, and a savy/energetic mgmt team (westjet plug), but I doubt its WJA. It could be Flair and flair ownership, they have shown the most new investment in this space in canada. Suddenly announcing 13 state of the art aircraft.

Potentially another businessman buying low to sell high. Lots of people goal to own an airline.

I cant see AC or TZ getting involved while trying to close a deal.

Enetjet needs planes, hotels, infrastructure...maybe them ?
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rudder
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Re: Sunwing Receives Takeover Offer

Post by rudder »

DHC-1 Jockey wrote: Fri Feb 05, 2021 6:36 pm
rudder wrote: Fri Feb 05, 2021 6:00 pm I cannot help but think that this is a party that believes SWG is cash strapped.
Even though Sunwing just got a $375 million loan? Yes, it has high interest rates, but that cash should be enough to carry the company forward for a few years at least and return to profitability.

They didn't go from 1 airplane 15 years ago to upwards of 40 in peak season, let alone building a huge hotel and real estate portfolio without printing their own money left and right.
It would appear to be an unsolicited offer.

With the identity of the offeror being withheld, one can only speculate as to their motives, or their assumptions about SWG willingness to sell.

The G&M article offers some speculation about the buyer and draws comparisons to other transactions.

My guess? Identity and motive of buyer doesn’t matter. Hunter will not be selling.
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Re: Sunwing Receives Takeover Offer

Post by telex »

seriousflyer wrote: Fri Feb 05, 2021 6:46 pm
Enetjet needs planes, hotels, infrastructure...maybe them ?
Hotels and infrastructure in foreign countries for a Canadian ULC?

Maybe not them...
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Re: Sunwing Receives Takeover Offer

Post by fish4life »

seriousflyer wrote: Fri Feb 05, 2021 6:46 pm Does anybody know if there has been any consolidation in the industry in North America? Or in the world ?

Most airline companies don't have cash or credit to buy another airline, as most are busy trying to save their companies.

However anything is possible with a good loan, available labour, and a savy/energetic mgmt team (westjet plug), but I doubt its WJA. It could be Flair and flair ownership, they have shown the most new investment in this space in canada. Suddenly announcing 13 state of the art aircraft.

Potentially another businessman buying low to sell high. Lots of people goal to own an airline.

I cant see AC or TZ getting involved while trying to close a deal.

Enetjet needs planes, hotels, infrastructure...maybe them ?
Airline companies don’t have extra cash but a company like Onex has been making money every quarter throughout the pandemic because it’s diversified and although WestJet is bleeding cash the parent company would have the ability cash to acquire more assets.

Flair could be another option and having guaranteed work would be a great way to help build to that 50 aircraft number quickly.
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Re: Sunwing Receives Takeover Offer

Post by boeingboy »

Steven Hunter will never sell. His father started it - it's family owned. Just read the article...there is no desperation there - it almost seems as if he's gloating. I think someone was on a fishing expidition...kinda like "hey - I like your $100,000 car....I'll give you $150,000 for it". It's not a publicly traded company so one can't simply take it over. It also makes perfect sense that he tells the media about it as the source said - it shows value to potential investors or loan suppliers. I have not seen anything in the last year that indicates we are so bad off that they need to sell/file for bankruptcy.

There is a Steller management team in place that is committed to the company and the Hunters, and the Hunters are just as committed to
the company and it's employees.

Sunwing was on solid financial ground before COVID - and (eventually) will be again. Money is still coming into the group and the airline is an essential part of that. Like he said - You would really have to sell the whole group. They will never operate the group without an airline. If it ever went under or sold - they would simply start another one. Everyone is so quick to say - "they can just charter" but there are many reasons why they started the airline in the first place and some of those points were only hammered home during the DISATEROUS 2019 charter of Eastern airlines. (due to the MAX groundings).
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Re: Sunwing Receives Takeover Offer

Post by speedah »

The deal will “fail” and Sunwing will promptly shut down the airline.
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Re: Sunwing Receives Takeover Offer

Post by boeingboy »

The deal will “fail” and Sunwing will promptly shut down the airline.
Dumbest comment today.
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Re: Sunwing Receives Takeover Offer

Post by tbaylx »

Peladeau maybe?
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Re: Sunwing Receives Takeover Offer

Post by seriousflyer »

Is it true the Sunwing pilot union sent out a comm stating something about the take over offer ?
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Re: Sunwing Receives Takeover Offer

Post by Yycjetdriver »

DHC-1 Jockey wrote: Fri Feb 05, 2021 6:36 pm
rudder wrote: Fri Feb 05, 2021 6:00 pm I cannot help but think that this is a party that believes SWG is cash strapped.
Even though Sunwing just got a $375 million loan? Yes, it has high interest rates, but that cash should be enough to carry the company forward for a few years at least and return to profitability.

They didn't go from 1 airplane 15 years ago to upwards of 40 in peak season, let alone building a huge hotel and real estate portfolio without printing their own money left and right.
375$ million to carry them for a couple years? I find this hard to believe.
What’s their current cash on hand/burn rate? What do they owe in refunds, if any?
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Re: Sunwing Receives Takeover Offer

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Good grief... :roll:
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Re: Sunwing Receives Takeover Offer

Post by telex »

boeingboy wrote: Sat Feb 06, 2021 9:51 pm Good grief... :roll:
I thought it was the teal team that drank the Kool-Aid. Ohhhhhh-YEAH!
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Re: Sunwing Receives Takeover Offer

Post by Yycjetdriver »

telex wrote: Sat Feb 06, 2021 10:01 pm
boeingboy wrote: Sat Feb 06, 2021 9:51 pm Good grief... :roll:
I thought it was the teal team that drank the Kool-Aid. Ohhhhhh-YEAH!
You thought wrong, the teal kool-aid dried up many years ago.
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Re: Sunwing Receives Takeover Offer

Post by telex »

Yycjetdriver wrote: Sat Feb 06, 2021 10:07 pm
telex wrote: Sat Feb 06, 2021 10:01 pm
boeingboy wrote: Sat Feb 06, 2021 9:51 pm Good grief... :roll:
I thought it was the teal team that drank the Kool-Aid. Ohhhhhh-YEAH!
You thought wrong, the teal kool-aid dried up many years ago.
Looks like Sunwings has a supply all of a sudden.
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Re: Sunwing Receives Takeover Offer

Post by boeingboy »

telex wrote: Sat Feb 06, 2021 10:14 pm
Yycjetdriver wrote: Sat Feb 06, 2021 10:07 pm
telex wrote: Sat Feb 06, 2021 10:01 pm

I thought it was the teal team that drank the Kool-Aid. Ohhhhhh-YEAH!
You thought wrong, the teal kool-aid dried up many years ago.
Looks like Sunwings has a supply all of a sudden.
Nope - no cool aid here. Just a little common sense.

But whatever - so we are getting sold to OWG, can look forward to a big paycut, and be out of business completely in 2 years.
C'est la vie
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Last edited by boeingboy on Sat Feb 06, 2021 10:50 pm, edited 1 time in total.
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