British Airways and Iberia agree MOU for merger
British Airways and Iberia’s boards have today agreed a binding memorandum of understanding (MoU) setting out the basis for a proposed merger of the two companies to create a new European airline group.
The new airline group would have 419 aircraft and fly to 205 destinations. In 2008, British and Iberia carried 62 million passengers. According to their latest financial year, their joint revenues are of approximately 15 billion euros.
The airlines believe there is a compelling strategic rationale for the transaction, which is expected to generate annual synergies of approximately 400 million euros, and benefit both companies’ shareholders, customers and employees. The new group will combine the two companies’ leading positions in the UK and Spain and enhance their strong presence in the international longhaul markets, while retaining the individual brands and current operations of each airline.
The merger is expected to be completed in late 2010.
The proposed merger will result in the creation of a new holding company (TopCo) that will own both the existing airlines and whose shareholders will be the current British Airways and Iberia shareholders. Under the terms of the proposed merger, British Airways shareholders will receive one new ordinary share in TopCo for every existing British Airways ordinary share held by them and Iberia shareholders will receive 1.0205 new ordinary shares for every existing Iberia ordinary share held by them. On the basis of this exchange ratio, and after cancellation of the treasury shares held by Iberia and prior to the cancellation of the cross-shareholdings held by British Airways and Iberia in each other, British Airways shareholders will hold 55 per cent of TopCo and Iberia shareholders will hold 45 per cent..
An ownership and governance structure (“National Control Structure”) has been developed to ensure that the existing route licences and traffic rights of both British Airways and Iberia are retained. For the first five years following completion of the transaction, the majority of the voting shares in British Airways and Iberia will be owned by special UK and Spanish bodies respectively (“National Bodies”). These shares will have minimal economic rights.