IAG has closed an agreement with Globalia for the acquisition of the remaining 80% (it already owns 20%) of the issued share capital of Air Europa for 400 million euros, as reported by the company to the National Securities Market Commission (CNMV). this Thursday and Globalia sources confirm.
The first €200 million for Air Europa will be paid upon receipt of approval from both national and European competition authorities, in two tranches: €100 million in IAG ordinary shares and €100 million in cash. The second and third year after the date of approval of the operation, another 100 million euros will be paid each. The deal is subject, however, to regulatory approvals, which could take around 18 months, both airlines agree.
On August 16, 2022, IAG made effective the conversion of a seven-year unsecured loan of 100 million euros to Globalia in a 20% stake in the capital of Air Europa. It must be remembered that the State rescued Air Europa with 475 million. The Government, therefore, had an interest in this operation so that this money did not fall on deaf ears.
The agreement between IAG and Globalia is now subject to the approval of the CNMC, as well as SEPI, which rescued Air Europa during the pandemic, and the ICO, with whom the Hidalgo family airline signed a syndicate loan whose balance alive at the end of 2022 was 132.5 million euros. A negotiation is now beginning with the competition authorities to essentially solve the problem of assignment of some take-off rights, known as slots. It was precisely this point that frustrated the operation in the past. Both companies have also decided to set compensation of 50 million euros if the operation does not end up materializing.
Until this go-ahead is obtained, both companies will continue to compete as to date, says Air Europa. Once closed, the Air Europa brand will be managed by Iberia.
IAG’s board of directors considers that the purchase of Air Europa, which has been negotiating for months, is a strategic operation to reposition Iberia in Latin America and the Caribbean, as well as to increase connectivity with Asia. The group aspires to turn the Madrid-Barajas airport into a ‘hub’ to compete with the main facilities in Europe.
“This agreement will allow IAG’s Madrid hub to compete on a level playing field 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 important benefits to our customers, employees and shareholders”, explained Luis Gallego, CEO of IAG.
IAG also considers that it will be able to achieve “significant synergies” thanks to the absorption of Air Europa “that will be achieved between 2026 and 2028”, provided that the operation is closed within the aforementioned 18 months.
