IAG’s purchase of Air Europa is off. The group released a very brief statement this morning confirming that the deal, initially conceived in November 2019, was headed for termination. IAG says that discussions to terminate the agreement are at an ‘advanced stage’ and that further updates will be made in the future.
Air Europa deal is off
The IAG takeover of Mallorca-based Air Europa looks to be all off, as the International Airlines Group (IAG) announced today that the deal is on the verge of termination. Air Europa, a leisure-based airline, was intended to be taken over by Iberia, part of the IAG family, in a deal that was struck during pre-COVID times, in November 2019.
In a statement today, IAG noted,
International Airlines Group ("IAG") and Globalia today confirm that discussions are at an advanced stage to terminate the agreement signed on 4 November 2019 and amended on 20 January 2021, under which IAG's subsidiary, Iberia, had agreed to acquire the entire issued share capital of Air Europa (the "Acquisition"). A further update will be made in the future, as appropriate
The statement, signed by Stephen Gunning, Chief Financial Officer of IAG, doesn’t delve into the detail of the reason for the termination. However, the impact of COVID has taken its toll on the European aviation group. Added to this, the deal was facing scrutiny from both the European Commission and the UK’s competition regulator.
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Competition concerns
The European Commission launched an investigation into the impact of the takeover on European competition back in June. The EU’s deadline for its inquiry was November 5th. However, after IAG requested an extension less than a month after the investigation began, this was pushed back to December 3rd. Most recently, the deadline was again moved back to January 4th, 2022.
In November, the UK’s the UK’s Competition and Markets Authority commenced an inquiry into IAG’s proposed purchase of Air Europa. The CMA had initially given itself two months to conduct the investigation and to come to a provisional decision - until January 19th, 2022. Specifically, the CMA was looking to establish whether the merger would result in a reduction in competition in air markets concerning the UK.
Now, it seems all bets are off, as IAG looks to walk away from the deal. Two years in the making, the original takeover price for Air Europa was pegged at a billion Euros. However, following the impact of COVID, the price for the airline had sunk to just €500 million ($564 million) by January this year.
What this means for both parties involved remains to be seen. For IAG, the decision to terminate comes just a day after the launch of its new British Airways short-haul subsidiary, and just weeks before the EU antitrust decision was due.