Steel magnate Alexei Mordashov, known as Russia’s richest man, with a fortune worth US$29-billion, has been sanctioned in Europe for his ties to the Kremlin and businesses that support the war against Ukraine. He’s also in line to be an indirect shareholder in Onex Corp.’s WestJet Group, should the Toronto investment company’s proposed takeover of Sunwing Travel Group go ahead.
Mr. Mordashov owns one-third of German travel company TUI AG, which owns 49 per cent of Sunwing and will become a part owner of the Onex subsidiary, according to the takeover deal WestJet and Sunwing announced last week.
John Gradek, who teaches aviation leadership at McGill University, said Mr. Mordashov’s presence in the ownership could jeopardize the takeover when it comes before Transport Canada and the Transport Minister for approval. “I think the deal’s in trouble,” said Mr. Gradek, adding Mr. Mordashov’s stake has likely ended any hope of a speedy regulatory review. “It doesn’t look good,” Mr. Gradek said.
Mr. Mordashov is one of several oligarchs whose assets are frozen as Europe tries to punish and isolate Russians for the invasion of Ukraine. He is chairman of Severgroup, which has stakes in government-friendly TV stations, and Bank Russiya, known as the bank of Russian politicians. His companies, including the bank and a wind turbine producer, have done business in Russian-occupied Crimea and helped destabilize Ukraine, the European Union said.
“He is therefore responsible for supporting actions and policies which undermine the territorial integrity, sovereignty and independence of Ukraine,” the EU said in a statement announcing sanctions on Mr. Mordashov and others.
Canada has announced travel bans and asset freezes on several oligarchs, but not Mr. Mordashov.
The WestJet-Sunwing takeover deal must be approved by Canada’s Competition Commissioner, and Transport Canada, which will conduct a public interest assessment of the proposal before making a recommendation to the Transport Minister, Omar Alghabra.
Ambarish Chandra, a professor at the University of Toronto who studies airline mergers, said Mr. Mordashov’s stake would be a “weird” reason to delay the deal, and the Canadian regulator should focus on other aspects of the proposal.
“Either this is something that’s allowed or it’s not,” Prof. Chandra said from New York. “If he’s an investor in Sunwing, if that’s legal, then him being an investor in WestJet should be equally legal.”
Prof. Chandra said given the collective size of the fortunes of oligarchs, and the difficulty in tracing money, it is unreasonable for regulators to focus on Russian investments. “That doesn’t seem to be the best use of regulatory resources to be tracking down every last dollar that every Russian oligarch spends around the world,” Prof. Chandra said.
Frédérica Dupuis, a Transport Canada spokeswoman, said the Transport Minister will “consider all relevant factors in reviewing any proposed merger. However, to respect the integrity of the process, it would be inappropriate to provide details on specific cases,” Ms. Dupuis said.
On March 2, WestJet said it has an agreement to buy Sunwing for an undisclosed price, a deal that would see Sunwing owner Stephen Hunter and TUI become shareholders in the Onex subsidiary.
Earlier, on Feb. 28, the EU announced sanctions against Mr. Mordashov that prevent him from selling his TUI shares, worth €1.56-billion. On the same day, he transferred his shares to a company in the Virgin Islands, TUI said. The stock is still attributed to him.
WestJet has said it hopes to receive regulatory approval for the takeover by the end of 2022.
Industry Minister François-Philippe Champagne on Tuesday signalled Russian investments in Canada will face heightened scrutiny. He announced changes to the Investment Canada Act that will allow the government to block an investment “regardless of its value, [that] has ties, direct or indirect, to an individual or entity associated with, controlled by or subject to influence by the Russian state.”
“Canada will continue to do everything we can to economically isolate the regime of Vladimir Putin,” Mr. Champagne said on Twitter.
It is not clear if Mr. Mordashov’s stake in Sunwing’s part-owner would prompt the government to block the WestJet purchase.
Onex and Sunwing did not respond to e-mailed questions.
“We take this very seriously and look forward to the international protocols that will be in place to resolve the question of passive, minority interests of this nature long before the close of this transaction,” Morgan Bell, a WestJet spokeswoman, said on Friday. The company said Monday it had no further comment.
Canadian law limits foreign ownership of airlines to 49 per cent, and does not discriminate by nationality. “But these are not normal times,” Mr. Gradek said.
TUI is one of the world’s biggest travel companies, with 1,600 travel agencies, five airlines, more than 400 hotels and 16 cruise liners. Mr. Mordashov, who has been a TUI investor for 15 years and bought a big stake in the London-listed company during the COVID-19 pandemic, resigned from TUI’s supervisory board on March 2.
Mr. Mordashov, 56, was worth about US$29-billion before Russia attacked Ukraine in February, according to Forbes. Now his riches are harder to estimate because the Russian ruble has plunged in value owing to economic sanctions applied by the EU and the United States. Italian police seized his 65-metre yacht, the Lady M, at a port on March 4.
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