Iberia buys Air Europa for 500 million euros

Four years after the proposed acquisition of Air Europa by the IAG group, which Iberia belongs to, was first announced, the acquisition was approved yesterday (Thursday) by the management committees of both companies.

The announcement came just 24 hours before IAG presents its 2022 results to investors and analysts later today (Friday), that the board of Globalia has accepted the conditions to finalise the purchase of the remainder of Air Europa shares after they purchased 20% of the airline for 100 million last year.

The total amount is estimated at around 500 million euros as a whole, half of what was announced in 2019 when the valuation was much higher, before the impact on the accounts of the pandemic.

Such was the collapse of Air Europa that it had to request a rescue package from the State of 475 million in 2020, the year of confinement. The company explained in a statement that the agreement involves the acquisition by IAG of the remaining 80% of Air Europa for 400 million euros, which will add to the 100 million already paid in 2022.

When the approval of the operation is received by the European Monopolies Commission, the first payment of 200 million euros will be made: half in cash and the other half in IAG shares at the price set at the signing of the agreement yesterday. This will make Globalia an important shareholder of the IAG group.

The other two payments, of 100 million euros each, will be made on the first and second anniversary of the approval by the Monopolies Commission. Along with this approval, the purchase also requires approval from SEPI and ICO because of the transferral of the rescue package.

The agreement establishes compensation of 50 million euros as a 'breakup fee' if the acquisition could not materialize. Until the pending approval is obtained, both companies will continue to operate as now, explained IAG.

IAG maintains that this purchase will make it possible to consolidate the airline's position for air connectivity between Europe and America; especially with Latin America and the Caribbean, where Air Europa has a wide network of destinations and a solid presence and recognition.