British Airways and Iberia sign merger agreement
08-Apr-2010 Further to and in accordance with the notification of relevant fact dated November 12, 2009, Iberia, Líneas Aéreas de España, S.A. (“Iberia”) notifies that, on the date hereof, after the conditions established for the purpose have been fulfilled, it has entered with British Airways Plc (“British Airways”) into the final merger agreement for the combination of both companies.
The merger agreement implements and specifies the terms of the merger transaction agreed, consistently in all significant aspects with the binding agreement (MoU) signed on November 12, 2009 and with the content of the notification made on said date.
Press release
Iberia and British Airways have today taken a further step towards creating a new leading European airline group by signing their merger agreement. The terms of the merger agreement are consistent with the binding memorandum of understanding (MOU) signed between the two airlines in November 2009.
The merger is expected to be completed in late 2010 and will benefit both airlines' shareholders, customers and employees. The new company will be one of the world's largest airline groups with 408 aircraft flying to 200 destinations and carrying more than 58 million passengers per year. It has been structured so that it can take advantage of further consolidation in the global aviation industry.
The new group will generate annual synergies of approximately €400 million by the fifth year of the merger.
It will create a new holding company called International Consolidated Airlines Group SA which will be known as International Airlines Group. Both airlines will retain their current operations and operate under their individual brands - British Airways and Iberia.
As detailed in the MOU, under the terms of the proposed merger, British Airways shareholders will receive one new ordinary share in International Airlines Group 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. The treasury shares held by Iberia and the cross-shareholdings held by British Airways and Iberia in each other will not be eligible for International Airlines Group shares. As part of the transaction it is expected that the treasury shares will be cancelled and the cross-shareholdings will remain at a subsidiary level.
International Airlines Group will have a premium listing in the UK and its shares will be traded on the main market of the London Stock Exchange and it is envisaged they will be included in FTSE's UK Index Series. In addition, the shares of International Airlines Group will be traded on the Spanish stock exchanges, through the Spanish Stock Exchanges Interconnection System (Mercado Continuo Español).
Since signing the MOU, the airlines have refined the synergies and confirmed the principles of how the organisation will be structured. They have also received regulatory confirmation from the UK and Spanish civil aviation authorities to ensure that the ownership and governance structure of both companies would permit the retention of the existing national route licences and traffic rights.
Antonio Vazquez, Iberia's chairman and chief executive, said: "This is an important step in the process towards creating one of the world's leading global airlines that will be better equipped to compete with other major airlines and participate in future industry consolidation. We look forward to concluding the deal before the year end."
Willie Walsh, British Airways chief executive, said: "The merged company will provide customers with a larger combined network. It will also have greater potential for further growth by optimising the dual hubs of London and Madrid and providing continued investment in new products and services."
The completion of the merger is subject to regulatory approval from the relevant competition authorities including the European Commission and approval by both British Airways and Iberia shareholders.
As announced in the MOU, Iberia will be entitled to terminate the merger agreement if the pension recovery plan agreed between British Airways and its pension trustees is not, in Iberia's reasonable opinion, satisfactory because it is materially detrimental to the economic premises of the proposed merger.
British Airways and Iberia expect to present the transaction for shareholder approval in November 2010 with completion expected to occur approximately one month later.