Yesterday, Deutsche Lufthansa AG’s advisory board approved the acquisition of Austrian Airlines Group. The key details are as follows (mostly from ATW and WSJ) -
- Luftansa will start with the purchase of state holding company OIAG’s share of 41.56% for $463,000 (€366,000).
- For the remaining share it will make a “€215 million bid for Austrian’s remaining shares at €4.44 per share,
subject to approval from Austrian competition authorities. The
per-share price equals the average weighted market price over the past
six months.“ - It will also issue a debtor warrant potentially worth up to
€163 million, “depending on Austrian Airlines’ economic performance and
the Lufthansa share outperforming its competitors.” - “Lufthansa also plans to launch a tender to buy out private shareholders for a further €215 million.“
- The offer is contingent on the Austrain government assuming “€500 million of AAG’s approximately €900 million debt“. WSJ reports, “deal would require regulatory approval, in part because the Austrian
government plans to spend €500 million helping to restructure the
airline“
Details about Austrian Airlines (from here)
- Founded – September 30th 1957
- First maiden flight – March 31st 1958 (Vickers Viscount 779 took off from Vienna for London, England via Zurich. Austrian Airlines was formed through the merger of Air Austria and Austrian Airways)
- Headquarters – Vienna, Austria
- Alliance – Star Alliance
- Frequent Fliers Program – Miles and More
- Hub – Vienna International Airport
- Fleet - 41 (7 Airbus A319, 8 Airbus A320, 6 Airbus A321, 1 Boeing 737-600, 2 Boeing 737-700, 7 Boeing 737-800, 6 Boeing 737-300ER, 4 Boeing 777-200ER)
- Misc – The armed monitoring of Austrian flights by Cobra
(police anti-terrorist-squad of Austrian Federal Ministry of interior)
began in 1981. During each accompanied flight at least two undercover
armed air marshals are onboard.
A lot of people are a critical about Lufthansa’s buying binge.
Some analysts are worried - “We are concerned that Lufthansa could be involved in too many deals,”
which could cause it to dilute current shareholders by issuing new
equity, Citigroup analysts wrote in August. Other outsiders worry that
Lufthansa’s management could get stretched too thin.”
I personally believe that it is a good time to buy and increase the network, esp. when the airlines are so cheap (post $150 a barrel and current recession period). Though, airline acquisitions are touch due to fleet differences, union issues, different work cultures and just different cultures.
