WestJet says it has agreed to be acquired by Onex Corp. and will become a private company in a transaction valued at $5 billion including debt.

The deal that came as a surprise to some, including the head of the pilots union.

Under the agreement announced Monday, Onex will pay $31 per share, or $3.5 billion, for WestJet.

Shares in the airline closed at $18.52 on Friday, but shot up to $30.03 on Monday morning as news of the Onex offer broke.

Completion of the transaction is subject to a number of conditions, including court, regulatory and shareholder approvals.

A special meeting of shareholders is expected to take place in July to vote on the transaction.

"I am particularly pleased that WestJet will remain headquartered in Calgary and will continue to build on the success that our 14,000 WestJetters have created," WestJet founder and chair Clive Beddoe said in a news release.

"Onex's aerospace experience, history of positive employee relations and long-term orientation makes it an ideal partner for WestJetters, and I am excited about our future."

Onex, a private equity firm based in Toronto, approached the airline in March.

There was no indication WestJet was up for sale, or that Onex was looking, said analyst Marvin Ryder, who teaches marketing at McMaster University.

"This was an absolute shock to me," Ryder said. "Onex typically likes to buy companies that they think are undervalued and then see if they can find a way to release that value."

Special meeting in July

"WestJet is one of Canada's strongest brands and we have tremendous respect for the business that Clive Beddoe and all WestJetters have built over the years," said Tawfiq Popatia, a managing director at Onex.

WestJet's board of directors has unanimously recommended shareholders vote in favour of the deal at meeting expected to be held in July.

The deal is expected to close in the latter part of 2019 or early 2020.

WestJet shareholders are expected to vote on the $5 billion acquisition at a special meeting in July. (Darryl Dyck/The Canadian Press)

Speaking to reporters on Monday, Alberta Premier Jason Kenney said he's confident the deal will be good for the company and for employees.

"They briefed me. I spoke today with the president of WestJet and the senior representative of Onex who was responsible for this transaction," he said.

"They made it very clear to me that they have made a commitment to retain all of the jobs at WestJet … most of which are located in Alberta."

Calgary Mayor Naheed Nenshi took a slightly more skeptical position.

"Private equity firms buy companies for one of three reasons: cut costs, grow the business, or restructure the industry. Which is it? And they said they are entirely focused on growth, and that's good news for WestJet, and it's good news for Calgary," he said.

"But we'll be watching very carefully and making sure that those promises are kept."

WestJet started in Calgary in 1996 and has expanded from a low-cost domestic airline to an international carrier with flights to the U.S., Europe and the Caribbean.

Changes and struggles

News of the deal comes after the airline struggled in 2018.

Soaring fuel costs, labour unrest, and steep competition at home and abroad caused the airline to incur its first loss in 13 years during the second quarter of last year. That was followed by a steep year-over-year drop in the third quarter, but the airline nonetheless bounced back into the black.

Revenues and efficiency were "nowhere near" the airline's potential, chief executive Ed Sims said during a WestJet investor conference in December 2018.

In the past six years, WestJet has created both regional and budget airlines — WestJet Encore and Swoop — and set its sights on long-haul routes with an order for 10 Boeing 787 jetliners set for delivery before 2022, receiving the first one earlier this year.

Previous purchase attempts

Some analysts suggest this is a vote of confidence in the company's direction.

"These are very strategic, astute investors, in Onex. They've concluded it's a strong company in a much better industry than it once was," said Ian Lee, who teaches strategic management at Carleton University.

"He [Gerald Schwartz, chief executive of Onex] has a track record, for 30-odd years, of astute investments. This guy is not someone who has a string of failures behind his name."

This isn't Onex's first attempt to acquire an airline. Twenty years ago it teamed up with American Airlines parent company AMR Corp. in a hostile $1.8-billion bid plus the assumption of debt to acquire and merge Canadian Airlines and Air Canada. The plan was dropped after being ruled illegal by a Quebec court.

Onex also failed in its effort in 2007 as part of a consortium to buy Australia's Qantas Airways Ltd.

WestJet's current growth spurt could generate profits that offset the rising cost of labour.

'Labour peace'

The nearly 4,000 flight attendants at WestJet and WestJet Encore have unionized over the past year. Meanwhile, Encore pilots have voted in favour of a five-year agreement that runs until Jan. 1, 2024, and WestJet pilots agreed to a settlement process last May.

Union chair Captain Dave Colquhoun said he first heard about the sale in a meeting Monday morning.

But he believes it's good news for the company.

"Things that are important to us are, you know, to make sure that agreement that we have right now remains in force. And we've been told that it will," he said. "We don't anticipate that they're going to change the strategy that our company's already embarked on."

Analyst Doug Taylor of financial services firm Canaccord Genuity said the Onex deal likely will not "dramatically alter" the competitive landscape.

"WestJet was generally well-funded and was already embarking on a large and highly competitive expansion plan. In our view, a private equity owner of an airline is likely to remain rational with respect to its approach to yields and profitability vs. market share," he said in a note to clients.

Onex was founded in 1984. The company says it manages $31 billion in assets.