Air Canada Partners to Help Fight Takeover

UAL Corp.’s United Airlines and Deutsche Lufthansa agreed to provide partner Air Canada with $489 million to help it repel a hostile takeover bid and to buy its smaller Canadian rival. Air Canada, Canada’s largest airline, will use the money to buy back as much as 35% of its outstanding shares for about $8.04 a share. Air Canada, a member of the Star Alliance partnership with Lufthansa and United, also proposed buying troubled Canadian Airlines Corp. for $62 million in cash. Air Canada has been searching for alternatives to a $1.1-billion bid from Toronto investment firm Onex Corp. In its proposal, Onex is relying largely on financial help from another foreign carrier, American Airlines owner AMR Corp., which has a 25% voting stake in Canadian. The Onex deal would combine Air Canada with Canadian Airlines and would move it into a competing alliance--Oneworld--which is led by British Airways and AMR.