TIDMIAG
RNS Number : 9150Q
International Cons Airlines Group
23 February 2023
INTERNATIONAL CONSOLIDATED AIRLINES GROUP, S.A.
Agreement for the full acquisition of Air Europa
International Airlines Group ('IAG' or the 'Group') is pleased
to announce it has agreed (the 'Agreement') with Globalia to
acquire the remaining 80 per cent of issued share capital of Air
Europa (the 'Acquisition'). The consideration is EUR400 million,
including EUR200 million upon closing, comprising EUR100 million in
IAG ordinary shares [1] and EUR100 million cash, followed by a
further EUR100 million payable in cash on each of the first and
second anniversaries of closing. The Agreement is subject to
regulatory and other approvals, which could take around 18
months.
This Agreement follows the conversion made by IAG on 16 August
2022 of a EUR100 million seven-year unsecured loan to Globalia into
a 20 per cent equity stake in Air Europa.
Strategic rationale
The Board of IAG believes that the Acquisition remains
strategically important for the Group and positions it to benefit
from growth opportunities in the Latin America and Caribbean
market, as well as to increase connectivity to Asia.
Upon completion, the benefits of the Acquisition include:
-- Transforming IAG's Madrid hub to compete with Europe's largest hubs.
-- Enhancing IAG's position in the highly attractive Europe to
Latin America and Caribbean market and enabling the company to open
routes to new destinations in Asia.
-- Delivering significant customer benefits by unlocking further
network opportunities and providing access to IAG's Avios loyalty
scheme.
-- Offering significant synergies, in line with those of
previous acquisitions, to be delivered around 2026 to 2028 assuming
closing in around 18 months.
IAG has a strong track record of maximising synergies from
previous acquisitions.
Highlights
-- On completion, the Air Europa brand will be retained under the management of Iberia.
-- Closing is expected to take place in around 18 months
following receipt of relevant approvals.
-- Payment deferred until closing and one to two years post-closing.
-- Limited impact expected on IAG's financial leverage ratios.
Further strategic and financial information will be provided at
a Capital Markets Day later in 2023.
Luis Gallego, IAG's chief executive, said:
"This agreement will enable IAG's Madrid hub to compete on an
equal footing with other European hubs and consolidate its position
in the South Atlantic. Madrid is the main gateway between Latin
America and Europe and there are opportunities to expand its
network, providing significant benefits to our customers, employees
and shareholders."
The Acquisition will provide opportunities for IAG to unlock
value across three key areas:
-- Integrating Air Europa into the existing Iberia hub structure at Madrid.
-- Creating commercial links between Air Europa and other IAG
operating companies, in addition to inclusion into IAG's joint
businesses.
-- Enabling Air Europa to benefit from IAG Loyalty and IAG Cargo
and IAG's common technology and procurement services.
Air Europa overview
Air Europa is a well-recognised brand and one of the leading
private airlines in Spain, currently operating scheduled domestic
and international flights, including European and longhaul routes
to Latin America and the Caribbean. It carried 13.1 million
passengers in 2019, 4.3 million in 2020, 5.0 million in 2021 and
10.0 million in 2022. Air Europa currently has an operating fleet
of 50 aircraft with 15 aircraft on order via aircraft lessors. All
aircraft are on operating lease, apart from one Boeing 737 finance
lease.
Transaction details
The payment will be comprised of EUR100 million in IAG ordinary
shares upon closing of the Acquisition based on the average trading
price of IAG shares on the Spanish Market in the five stock
exchange sessions immediately prior to the date of this Agreement
and EUR100 million in cash upon closing, followed by EUR100 million
in cash on each of the first and second anniversaries of the
closing date. The consideration for the transactions will be a
total amount of EUR500 million for 100 per cent of the equity
capital of Air Europa.
The Agreement is conditional on Globalia receiving approval from
syndicated banks that provided the loan agreement partially
guaranteed by the Instituto de Crédito Oficial (ICO) and by
Sociedad Estatal de Participaciones Industriales (SEPI). The
Acquisition is also subject to approval by relevant competition
authorities.
IAG has agreed to pay a break-fee of EUR50 million if (i) it
terminates the Agreement at any time prior to the closing date or
(ii) the conditions for closing are not met prior to the second
anniversary of the date of the Agreement. IAG retains the right to
exit its current stake in Air Europa alongside Globalia should Air
Europa be sold to a third party after termination of the
Agreement.
The Acquisition constitutes a Class 2 transaction for the
purposes of the UK Financial Conduct Authority's Listing Rules and,
as such, does not require IAG's shareholders' approval.
Nicholas Cadbury
Chief Financial Officer
23 February 2023
Notes to editors
Air Europa financial information
Air Europa reported revenue of EUR2.1 billion, operating profit
of EUR71 million and pre-tax profit of EUR42 million for the year
ended 31 December 2019. Air Europa Holding, S.L. reported revenue
of EUR756 million, operating loss of EUR460 million and pre-tax
loss of EUR465 million in 2020. For 2021, it reported revenue of
EUR897 million, operating loss of EUR287 million and pre-tax loss
of EUR330 million. Gross assets at the end of 2021 were EUR928
million. These figures are based on Spanish GAAP and exclude
aircraft operating leases. 2022 financial data is not yet
available.
Air Europa loans
On 18 May 2020, Air Europa signed a syndicated loan agreement
for a EUR141 million five-year term loan partially guaranteed by
the Instituto de Crédito Oficial (ICO). This arrangement was within
the legal framework set up by the Spanish government to mitigate
the economic impact of COVID-19. In 2021 it was agreed to extend
the maturity date of the loan until 2028. As of 31 December 2022
the amount outstanding was EUR132.5 million.
On 11 November 2020, SEPI approved loans of up to EUR475 million
for 6 years to be provided to Air Europa in order to support its
liquidity during and after the pandemic. The approval of these
loans was subject to certain non-financial conditions.
On 17 March 2022, IAG made a EUR100 million seven-year unsecured
loan to Globalia, which included the option to convert the loan
into an up to 20 per cent equity stake in Air Europa, subject to
any relevant regulatory approvals. This option was subsequently
exercised by IAG on 16 August 2022.
[1] 54,064,575 shares based on the average trading price of IAG
shares of EUR1.8496 on the Spanish Market in the five stock
exchange sessions immediately prior to the date of the
Agreement
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