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Old 05-13-2019, 11:27 AM   #1
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Interesting day as Onex buys up Westjet


https://www.ctvnews.ca/business/onex...source=twitter


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Onex Corp. has signed a friendly deal to buy WestJet Airlines Ltd. in an all-cash transaction it valued at $5 billion, including assumed debt.

Under the agreement announced Monday, Onex will pay $31 per share for WestJet, which will operate as a privately held company.
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Old 05-13-2019, 11:30 AM   #2
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Those shortsellers on Westjet after the Boeing Max fiasco are screwed! up 60% from Friday.
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Old 05-13-2019, 11:31 AM   #3
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Incoming increase to fares and job losses.
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Old 05-13-2019, 11:56 AM   #4
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Does 5 B seem cheap to anyone else ??
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Old 05-13-2019, 12:34 PM   #5
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Does 5 B seem cheap to anyone else ??
I simply have no idea what i'm talking about, but yes it seemed low when I heard it. I wonder how Onex assuming $5B of WestJet's debt factored into that valuation
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Old 05-13-2019, 12:36 PM   #6
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Where is Onex based? Is there a chance they pull headquarters from Calgary?
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Old 05-13-2019, 12:38 PM   #7
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Does 5 B seem cheap to anyone else ??
Its interesting that mention that because I was beginning to think the exact same thing.

It seems kind of low for a fairly major airline, were there significant liabilities involved in the sale that drove the price down?
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Old 05-13-2019, 12:42 PM   #8
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Its interesting that mention that because I was beginning to think the exact same thing.

It seems kind of low for a fairly major airline, were there significant liabilities involved in the sale that drove the price down?
I heard on the report that it would include all WestJets's debt and liabilities. Maybe a large chunk of the planes have not been paid off.
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Old 05-13-2019, 12:42 PM   #9
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Where is Onex based? Is there a chance they pull headquarters from Calgary?
Toronto. They said they wouldn't be moving headquarters. But who knows, Toronto is where more of their flights are based out of now, but Calgary would probably be cheaper still.
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Old 05-13-2019, 12:44 PM   #10
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I have no idea how to value a company, but did'nt Dragon's Den say 10x earnings or something?


https://www.westjet.com/assets/wj-we...ual-Report.pdf


Averaging roughly $400 million a year, so $5 billion kinda makes sense?


Massive armchair financier here.
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Old 05-13-2019, 12:45 PM   #11
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i was wondering if some of the uncertainty around carbon pricing may have had a detrimental effect on the whole deal. i have read suggestions that airline tickets may increase by $100 or more over the next few years

onex seemingly has offices in TO, London NY & New Jersey. From what i have read they are going to operate WJ as is, so hopefully no changes here in calgary
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Old 05-13-2019, 01:35 PM   #12
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Originally Posted by Johnny Makarov View Post
Those shortsellers on Westjet after the Boeing Max fiasco are screwed! up 60% from Friday.
This was the first thing that came to mind.
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Old 05-13-2019, 02:04 PM   #13
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Toronto. They said they wouldn't be moving headquarters. But who knows, Toronto is where more of their flights are based out of now, but Calgary would probably be cheaper still.
Onex is a private equity firm. Their business is buying and selling businesses. They don't move the headquarters or take over operations on any of the businesses they buy. There's no way they'd make an exception in a case where it would be a high profile negative for a huge portion of their customer base.
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Old 05-13-2019, 02:48 PM   #14
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I have no idea how to value a company, but did'nt Dragon's Den say 10x earnings or something?


https://www.westjet.com/assets/wj-we...ual-Report.pdf


Averaging roughly $400 million a year, so $5 billion kinda makes sense?


Massive armchair financier here.
Valuing a startup is completely different than valuing an airline

They likely used other airline acquisitions as comparables
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Old 05-13-2019, 03:06 PM   #15
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Quote:
Originally Posted by Fuzz View Post
I have no idea how to value a company, but did'nt Dragon's Den say 10x earnings or something?


https://www.westjet.com/assets/wj-we...ual-Report.pdf


Averaging roughly $400 million a year, so $5 billion kinda makes sense?


Massive armchair financier here.

Sounds right from my knowledge of investing and business. Generally speaking, a person wants to buy a business with a price less than 10 times earnings.
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Old 05-13-2019, 03:23 PM   #16
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Sounds right from my knowledge of investing and business. Generally speaking, a person wants to buy a business with a price less than 10 times earnings.
You need a Net Present Value determination.

To calculate the NPV, the first thing to do is determine the current value for each year's return and then use the expected cash flow and divide by the discounted rate.

Net Present Value (NPV) = Cash Flow / (1+rate of return) ^ number of time periods


I would maybe post more on it, but I swore to myself I would never utter those words ever again after completing corp finance. I'm getting anxiety thinking about it, actually.
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Old 05-13-2019, 03:31 PM   #17
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A company like Onex would use more valuation methods than just a rule of thumb like earnings multiples. Discounted cash flows, payback period, future rates of return meeting their hurdle rates, etc, all based on their internal estimates of what they believe WJ's earnings/cash flow outlook looks like over the short and long term.
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Old 05-13-2019, 04:53 PM   #18
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Originally Posted by Tron_fdc View Post
You need a Net Present Value determination.

To calculate the NPV, the first thing to do is determine the current value for each year's return and then use the expected cash flow and divide by the discounted rate.

Net Present Value (NPV) = Cash Flow / (1+rate of return) ^ number of time periods


I would maybe post more on it, but I swore to myself I would never utter those words ever again after completing corp finance. I'm getting anxiety thinking about it, actually.
You may be able to give me some direction on my current learning. I have been learning about using net present value and discounted cash flow models to value stocks. I just started trying to find downloadable excel spreadsheets of these models that I can use rather than trying to build my own spreadsheet. I have found a couple of templates but I question how good they are. Is there a resource you could point me to for more info and a good spreadsheet for the tasks?
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Old 05-13-2019, 04:55 PM   #19
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Wonder if they figure the shares were significantly below market and think they can add value over time and then exit with an IPO?
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Old 05-13-2019, 05:23 PM   #20
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You may be able to give me some direction on my current learning. I have been learning about using net present value and discounted cash flow models to value stocks. I just started trying to find downloadable excel spreadsheets of these models that I can use rather than trying to build my own spreadsheet. I have found a couple of templates but I question how good they are. Is there a resource you could point me to for more info and a good spreadsheet for the tasks?
Honestly my experience was fumbling through corporate valuations in a university course that sucked the life out of me. But if you want to learn more I would hit the library and get a CFA level 1 study module (assuming you have some kind of financial background).

God speed.
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