RNS Number : 2373M
International Cons Airlines Group
19 January 2021
Amendment Agreement for the Acquisition of Air Europa
International Airlines Group ("IAG") and Globalia today announce
that they have amended the original agreement announced on 4
November 2019 (the "Original Agreement") under which IAG's
subsidiary, Iberia, has agreed to acquire the entire issued share
capital of Air Europa (the "Amendment Agreement") (the
Under the terms of the Amendment Agreement, the parties have
agreed that the amount to be paid by Iberia for Air Europa will be
reduced from an equity value of EUR1 billion to EUR500 million with
payment deferred until the sixth anniversary of the Acquisition's
The revised terms in the Amendment Agreement are conditional on
the satisfactory negotiation between Iberia and Sociedad Estatal de
Participaciones Industriales ("SEPI") regarding the non-financial
terms associated with the financial support provided by SEPI to Air
Europa during 2020. Iberia intends to begin discussions with SEPI
shortly concerning these conditions.
Assuming satisfaction of all conditions of the Amendment
Agreement and the Acquisition, completion is expected to take place
in the second half of 2021. The Acquisition is still subject to
approval by the European Commission.
Strategic Rationale and Financial Impact
The Board of IAG continues to believe that the Acquisition
remains strategically important for the future of IAG and Iberia
and positions the Group to benefit from growth opportunities as the
industry emerges from the unprecedented impact of the COVID-19
crisis. The benefits of the Acquisition include:
-- Increasing the importance of IAG's Madrid hub, transforming
it into a true rival to Amsterdam, Frankfurt and Paris Charles de
-- Unlocking further network growth opportunities; and
-- Delivering significant customer benefits through providing
increased choice and schedule flexibility and greater opportunities
to earn and redeem miles.
IAG continues to expect the Acquisition to generate significant
cost and revenue synergies, with full run-rate synergies similar to
those originally envisaged and now expected by 2026. The
Acquisition is expected to be earnings accretive in the first full
year following completion, deliver considerable value to the Group
through synergy generation prior to the payment of the
consideration on the sixth anniversary of completion, and generate
returns on invested capital in line with those historically
achieved by IAG by then.
Assuming completion in the second half of 2021, IAG will be
taking on Air Europa at a time when air travel recovery could be
meaningful as the rollout of COVID-19 vaccines proceeds worldwide.
Net cash outflow to IAG of this transaction is expected to be
minimal in 2021 and net cash flows are expected to be positive
until at least the repayment of the loan from SEPI in 2026 when
merger synergies are expected to be at their full run-rate.
Luis Gallego, IAG's chief executive, said:
"Both Iberia and IAG are demonstrating their resilience to face
the deepest crisis in aviation's history. Being part of a large
group is the best guarantee to overcome current market challenges
which will also benefit Air Europa once the transaction is
completed. I am pleased that we have reached agreement with
Globalia to defer payment until well into the expected recovery in
air travel following the end of the pandemic and when we expect to
be realising significant synergies resulting from the
Javier Hidalgo, Globalia's chief executive, said:
"This transaction is a great effort by all of us and is the best
way to recover tourism, transport in Spain and the Madrid hub."
Javier Sánchez-Prieto, Iberia's chief executive, said:
"This transaction makes perfect strategic sense to reinforce
Madrid's hub competitiveness on a global stage. It will benefit
consumers and Air Europa's incorporation into the Iberia Group will
improve the company's viability benefitting both Iberia and Air
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.
The gross assets of Air Europa at 31 December 2019 were EUR967
million. Revenue of EUR2.1 billion, operating profit of EUR71
million and pre-tax profit of EUR42 million were attributable to
Air Europa for the year ended 31 December 2019. These figures are
based on Spanish GAAP. Air Europa carried 13.1 million passengers
in 2019. Passenger volume declined by approximately 70 per cent in
Air Europa currently has an operating fleet of 52 aircraft
compared to 68 at the end of 2019. All aircraft except one are on
operating lease. IAG estimates the IFRS 16 lease liabilities of Air
Europa to be c.EUR1.6 billion as of the end of 2020.
Notes to Editors
Air Europa is one of the leading private airlines in Spain,
operating scheduled domestic and international flights on European
and long-haul routes to Latin America, the United States of
America, the Caribbean and North Africa.
On 4 November 2019, IAG announced that it had offered to acquire
the entire issued share capital of Air Europa for EUR1 billion to
be satisfied in cash at completion, which had been expected to
happen in the second half of 2020.
On 18 May 2020, Air Europa signed a syndicated loan agreement
for a EUR141 million 5 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.
On 31 July 2020, IAG disclosed that it was in active discussions
with Globalia regarding a potential restructuring of the
Acquisition, taking into account the impact of the COVID-19
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. The
financial net debt of Air Europa, including the drawn ICO and SEPI
loans, was approximately EUR500 million as of the end of 2020.
Chief Financial Officer
19 January 2021
This announcement contains inside information and is disclosed
in accordance with the Company's obligations under the Market Abuse
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(END) Dow Jones Newswires
January 20, 2021 02:00 ET (07:00 GMT)