Lufthansa formally notifies EC of proposed Austrian takeover

The European Commission received notification of Lufthansa Group's proposed acquisition of Austrian Airlines Group and set a June 17 deadline to complete a first-phase review of the deal.

LH launched a public offer for AAG on March 2 after reaching agreement with state holding company OIAG to buy its 41.56% stake for €366,000 ($498,843) plus an "earn-out option" that could amount to as much as €164 million depending on AAG's future economic performance and LH's share outperforming its competitors.

LH's €4.49-per-share offer is conditioned on antitrust clearance by July 31 from the EC and other relevant authorities and the approval of €500 million in restructuring aid from OIAG to AAG. LH's offer also is subject to acquiring at least 75% of AAG's permanent voting shares.

The EC opened a formal investigation into the privatization and restructuring of AAG in February, including its sale to LH, and expressed "doubts that the price to be paid by Lufthansa reflects the market price for what is being sold" (ATWOnline, Feb. 12). Air France KLM, which was interested in acquiring the Austrian flag carrier, filed a complaint with the EC. British Airways and Ryanair also raised objections.

LH, which is pursuing a long-term strategy of becoming a "system of independent airlines" with multiple European power bases (ATWOnline, May 1), additionally is waiting for decisions from the EC on two other acquisitions, Brussels Airlines and bmi.

The bmi takeover is proving tumultuous. LH requested that bmi Chairman Michael Bishop, who is selling his 50% plus one share to LH, participate in a recapitalization of bmi to avoid a potential breach of the UK CAA's capital-adequacy requirements, according to The Sunday Times. Bishop reportedly has refused to inject the requested £100 million and has downplayed the risk of a breach.