2023-10-03 16:57:00
It’s almost the world turned upside down. While Lufthansa is regarding to take a stake in ITA Airways, beating Air France-KLM to the post, the French group is preparing to take its German competitor from behind. He has just announced his desire to acquire a stake in SAS AB, in other words the company SAS Scandinavian Airlines. Associated with financial players within a consortium, Air France-KLM was selected to take more than 60% of the Scandinavian group. On its own, the French group should go up to 19.9% of the capital, as well as 5% of the convertible debt, for an investment of 144.5 million dollars.
“This is an important day for SAS and for Air France-KLM. We are pleased to be part of the consortium selected by the SAS board of directors. Air France-KLM intends to establish strong commercial ties with the company”rejoiced Benjamin Smith, CEO of Air France-KLM.
Of the $144.5 million invested by Air France-KLM, $109.5 million will be in ordinary shares and $35 million in guaranteed convertible bonds.
1933-2023: the incredible saga of Air France
A hit worth more than a billion dollars
In fact, the capital of SAS, currently held by the Swedish and Danish governments (up to 21.8% each since the 2020 recapitalization) and a number of private institutional investors, will be profoundly disrupted. If Air France-KLM will become SAS’s main industrial partner, it is not alone in the operation. The French group is associated with fund manager Castlelake and family office Lind Invest within the selected consortium, while Copenhagen will also get back into the mix.
The total amount of the funding round amounts to a total of “$1.175 billion, including $475 million in common stock and $700 million in secured convertible bonds”according to a press release.
The main investor will be Castlelake which will get its hands on 32% of the capital and 55.1% of the convertible debt, followed by the Danish State (25.8% of the capital and 29.9% of the convertible debt), Air France- KLM therefore, and finally Lind Invest (8.6% of the capital and 10% of the convertible debt). The remaining 13.6% of the capital will be distributed to creditors.
This distribution should vary subsequently. The consortium might be reinforced by other financial partners, while Air France-KLM plans to become a controlling shareholder subsequently, that is to say passing the 25% mark. The group has for the moment been content to remain below the 20% mark to avoid an investigation by the competition authorities, the timing of which would not have been compatible with the operation.
Especially since the priority for SAS is to quickly emerge from the crisis, which has been placed under the protection of Chapter 11 of the American bankruptcy law since 2022. This should be the case by the end of the year .
In great difficulty, SAS will have difficulty attracting desire
Conditions to be met
Several conditions must be met beforehand, including the exit of SAS from the global Star Alliance (led in particular by Lufthansa). Instead, Air France-KLM intends to offer enhanced commercial cooperation to the Scandinavian company. “Thanks to its historic roots in Scandinavia and its strong brand, SAS presents considerable potential for Air France-KLM. This cooperation would allow Air France-KLM to strengthen its presence in the Nordic countries and improve connectivity in this region for the benefit of Scandinavian and European travelers.notes Benjamin Smith.
The transaction will also have to obtain validation from various authorities, in particular the European Commission like Lufthansa which is still waiting for the green light from Brussels to validate its acquisition of a stake in ITA Airways. It will also be necessary to have the approval of the American court responsible for supervising the reorganization of SAS under Chapter 11.
As a reminder, in 2009, discussions took place between the two groups. SAS had in fact launched an informal consultation procedure and had contacted Air France-KLM. The French group considered the file interesting but its financial health worrying.
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