IAG announces binding deal to buy Lufthansa's BMI

MANAVIGATOR-December 22, 2011-IAG announces binding deal to buy Lufthansa's BMI

22 December 2011 - International Airlines Group (LON:AIG), the parent of British Airways, said on Thursday it had entered into a binding agreement to buy airline British Midland Limited (BMI) from German flag carrier Lufthansa (ETR:LHA).

The agreed cash price of GBP172.5m (USD275m/EUR210.3m) is subject to significant reductions and will be covered from IAG's own funds, the buyer said in a release.

IAG will pay GBP60m of the total before the completion of the deal in four tranches to Lufthansa, secured by Heathrow slots.

The transaction will add up to 56 daily slot pairs to IAG's slots portfolio at the Heathrow airport, as well as increase its EPS by 2014 and boost its 2015 operating profit target by over EUR100m (USD131m). It would also help IAG reach a 12% return on capital invested by 2015, the buyer said.

Under the agreed terms, Lufthansa will take on BMI's defined benefit pension scheme and will have the option to dispose of the BMI regional and BMIbaby units before the completion of the deal.

Failure to comply with this option, would result in substantial reduction of the price IAG would pay for BMI, the buyer said.

The parties hope to wrap up the deal in the first quarter of 2012, pending approvals by the European Commission and other regulators.

BMI comprises three distinct businesses, namely BMI mainline, BMI regional and BMIbaby.

It ended 2010 with revenues of GBP777m and a loss before tax of GBP153m. Its gross assets at 31 December 2010 stood at GBP284m.Country: UK, Sector: Air TransportTarget: British Midland Limited (BMI)Buyer: International Consolidated Airlines Group (IAG)Vendor: Deutsche Lufthansa AGDeal size in USD: 275mType: Corporate acquisitionFinancing: Cash, Existing resourcesStatus: AgreedComment: Price is subject to adjustments.