A Russian oligarch in the shadow of the marriage between Sunwing and WestJet

Russia’s wealthiest oligarch, now blacklisted by the European Union (EU), would land in WestJet’s shareholding if the country’s second-largest airline gets its hands on Sunwing. The transaction could take a political turn as Ottawa steps up its retaliation against Russia.

Julien Arsenault
The Press

“This puts a yellow light on certain aspects, explains Professor Yan Cimon, from the management department of Laval University. The issue here is essentially a reputational issue. »

Considered the richest man in the country of Vladimir Putin, Alexei Mordachov controls 34% of the German tourism giant TUI, which owns 49% of Sunwing. In Canada, the businessman is not subject to sanctions for the moment.

The mechanics of the transaction announced Wednesday provides that the shareholders of Sunwing and Sunwing Vacations would become shareholders of the WestJet group – owned by the Toronto investment firm Onex. Mr. Mordashov would be an indirect shareholder through his stake in TUI.

Considered a “key shareholder” of Sunwing, TUI “will benefit from a stake” in WestJet, is it explained in a document provided by the two partners.

“Now that we know it, I find it embarrassing,” says Ivan Tchotourian, professor specializing in governance and social responsibility at Université Laval. A Russian oligarch who will have a stake, even an indirect one, in a large Canadian company, in the current context, that poses a problem. »

Logical, but tricky

The presence of Mr. Mordashov in the portrait does not call into question the operational motives that led to the agreement between WestJet and Sunwing, say MM. Cimon and Tchotourian. The two companies are complementary and their combination should pass the competition watchdog test in Canada.

Nevertheless, the transaction may well come under closer scrutiny.

“In governance, transparency is one of the major trends,” explains Mr. Cimon. It is important to highlight these links. I think this is an element that needs to push the reflection a little further. »

The Competition Bureau will have to look into the proposed marriage between WestJet and Sunwing. The two companies say they have “notified” the federal Department of Transport of their merger.

Mr. Tchotourian believes that the Trudeau government has few tools at its disposal to intervene. When a foreign acquirer makes purchases in Canada, the transaction is subject to the Investment Canada Act. In the case of WestJet (Calgary) and Sunwing (Toronto), these are two companies established in the country.

Asked about Mordashov, Sunwing replied in an email that she “condemns the horrific attacks on the Ukrainian people”. The company added that the billionaire “was not a shareholder of TUI” when it entered into an agreement with the group in 2009.

“As a minority shareholder in Sunwing, TUI has no say or control over operational decisions,” the company wrote. This will remain the case if this transaction [avec WestJet] is approved. »

The Press sent questions to Global Affairs Canada, the Department of Finance and Innovation, Science and Economic Development Canada. After several hours of dithering, they preferred to send the ball back to the Competition Bureau late Thursday afternoon.

It had not been possible to obtain comments from the Bureau on Thursday.

TUI distances itself

The EU has just added Mr. Mordashov to its list of people sanctioned because of their links with the Russian president in the wake of the invasion of Ukraine. The measures concern asset freezes as well as travel bans.

This forced the billionaire to resign from TUI’s supervisory board.

Splashed by the affair, the German giant had to publish a press release to ensure that the European sanctions had “no impact on the company, its customers and its employees”.

“The purpose of the sanctions is to prevent Mr. Mordashov from selling his shares in TUI and realizing any proceeds or profit from his investment,” TUI wrote.

If the Russian billionaire holds such a large stake in TUI, it is because he flew to the aid of the tourism giant last year by participating in a recapitalization of the group, severely affected by the pandemic.