One of Asia's wealthiest families has locked horns with a New York investment fund over Air Canada, in a dispute that is as much a clash of Canadian and American business styles as a disagreement over a deal.
Air Canada, which has operated under the supervision of bankruptcy court since April, is expected to ask an Ontario Superior Court judge on Dec. 8 to approve an agreement that would make Trinity Time Investments the airline's largest shareholder. Trinity, controlled by Victor Li, son of the Hong Kong magnate Li Ka-shing, would acquire 31 percent of the airline's equity for C$650 million (US$500 million).
Air Canada struck the deal with Li on Nov. 8 after setting aside a competing bid from Cerberus Capital Management, a private equity fund that specializes in distressed companies.
Undaunted, Cerberus came back two weeks later with offers to acquire either 12 percent or 27 percent of Air Canada. Only the broad outlines of the two new offers have been made public so far, but they appear to be much more favorable to the airline's creditors than Trinity's.
The Cerberus offers would give the creditors the right to buy up to US$850 million worth of shares in a restructured Air Canada, almost twice the amount proposed by Li. Several major creditors are expected to join Cerberus in opposing the Trinity deal in court on Dec. 8.
Comparing the styles of the two sides, Douglas Reid, an aviation specialist at Queen's University business school in Kingston, Ontario, said that "Li has essentially played within the rules," while Cerberus has taken a more aggressive and more typically American approach, which he summed up as, "If you don't win the first time, change the law and try a second time."
Trinity said Cerberus' new offers were "improper interference." Calls to Cerberus and its Canadian lawyers were not returned.
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