New owner and a new beginning for WestJet
Let’s hope Schwartz’s plan works and airline stays here
“When I’m buying some company, people call and congratulate me: ‘Hey, you’ve bought BC Sugar — isn’t that great!’ And I’m thinking these people don’t get it.
“Anybody can buy a company; all you do is pay for it. What determines the success of the deal is what we do with it.
“We’ve got to fix it, make it run better, get the costs down, straighten out its market position; there’s real work to do. So I never feel good when I’ve bought something.”
That’s Gerry Schwartz being interviewed by Peter C. Newman 20 years ago when Newman was penning volume three of The Canadian Establishment.
Newman dubbed the arriviste challengers to the old-money, died-in-the-wool crowd the “Titans.”
In pondering this, Schwartz said to Newman, delightfully, “All that Bud McDougald s--t is gone.”
The new players did seem to possess God-like corporate powers alongside occasionally ruthless ambition.
What’s striking today is the tally of the Titans who lie dead, defunct or disgraced, from Ted Rogers to Peter Munk to Izzy Asper to Conrad Black, while Schwartz’s Onex Corp. leads a $3.5-billion takeover of spunky, flyer-friendly WestJet Airlines Ltd.
Gone too, or at least severely diminished, is the footprint of Canadian owned and operated businesses.
Recall Munk’s lamentations over the diminishment of mining and manufacturing in Ontario.
Recall Izzy Asper’s unwavering determination to keep his communications company headquartered in Winnipeg because Toronto, well, meh.
Recall the still unpalatable takeover of historic Canadian breweries — Molson and Labatt — by international conglomerates.
For Schwartz, the beer episode was particularly painful.
He will admit to Onex’s mishandling of its $2.3-billion bid for Labatt in 1995, with Interbrew S.A. of Belgium emerging the victor.
“The tragedy of it is that we would have been by far a better home for Labatt than where it went,” Schwartz told Newman. “It would have remained Canadian, and the senior management team would have been owners in the company instead of continuing to be employees.”
As a takeover courtier, Schwartz failed. His Labatt strategy was hostile and his price ultimately low.
Contrast that to WestJet, which is playing out like a love affair between the Calgary-based airline and the Bay Street private equity powerhouse. And a high-priced affair at that, one that is due to be consummated this summer.
No obvious barriers lie in the way.
Should Onex be successful in growing the airline and straightening out its market position, Schwartz will be championed by investors and maybe even passengers alike.
Eons ago, I tagged along with Schwartz as he toured the Sky Chefs catering operation at LAX. Onex had purchased Sky Chefs from American Airlines in 1986.
That acquisition presented the daunting challenge of improving margins from inflight food service.
Schwartz detailed how operations had been timed to the second and how the double handling of food items had been eliminated. The time to prepare high-margin meal trays for first-class passengers: 28 seconds. The time to prepare a meal tray for the rest of us: 18 seconds.
There are two ways to view this: The first is as a contemporary equivalent of the assembly line in Modern Times. The more astute takeaway is that Schwartz understands the importance of both the miniscule detail and the big picture of brand positioning.
At 77, he surely remembers how lovely it was to fly Wardair in its heyday. Cloth napkins. Real glassware.
Onex exited the Sky Chefs investment in 2001. Having entered the deal at a cost of $99 million, the final outgoing take was $1.8 billion.
The way I see it, the WestJet acquisition not only delivers to Schwartz his long-held ownan-airline dream, but presents him as proprietor of a known, high-profile Canadian company. As it is, the Onex portfolio has gained and shed acquisitions across a 35-year period. It’s doubtful that many of its 635 deals would ring any bells.
Today, Onex is a majority owner in Jack’s Family Restaurants, a quick-service chain based in Alabama. It has struggled — that’s putting it politely — with its 2016 acquisition of Save-a-Lot, an American discount grocery retailer.
It purchased IntraPac in 2017 (vials, bottles and tubes for personal care and household products).
Clarivate Analytics is one of those “solutions” companies with a made-up name that is about to go public on the New York Stock Exchange.
I once asked Schwartz what Onex meant. He responded that the name has no meaning but that the “X” made it sound with it.
Which takes us to the obvious conclusion:
Gerry Schwartz’s acquisition of WestJet is a legacy play. To purchase a Canadian company. To build a Canadian company. To keep it a Canadian company.
I hope I’m right about that.