IAG Is Considering a Complete Takeover of Norwegian Air

Apr 12, 2018

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Update 8:00am ET: Norwegian has issued the following statement:

“Norwegian has just been made aware that the International Airline Group (IAG) has acquired of 4.6 percent of the shares in Norwegian Air Shuttle ASA. Norwegian had no prior knowledge of this acquisition before it was reported by the media mid-morning Thursday. Norwegian has not been in any discussions or dialogue with IAG about the matter. Norwegian believes that interest from one of the largest international aviation groups demonstrates the sustainability and potential of our business model and global growth.”

IAG, the parent company of British Airways, Iberia, Aer Lingus, among others, announced on Thursday that it’s acquired a 4.61% stake in low-cost carrier Norwegian Air. The move signals that IAG could be considering a full acquisition of Norwegian.

The preliminary minority stake puts IAG in position for a potential takeover — one that IAG is considering. “The minority investment is intended to establish a position from which to initiate discussions with Norwegian, including the possibility of a full offer for Norwegian,” IAG said in a statement.

At this point, IAG has acquired just the 4.61% stake in Norwegian. The group says that no further discussions for a complete takeover have taken place to date. In addition, at this point, it has made no decision whether or not it will make an offer to Norwegian, and there is no certainty that it will.

Norwegian Air declined to comment.

Since the announcement, shares of Norwegian Air soared by a record 26% on Thursday. Bloomberg reports that a potential acquisition of Norwegian has a market value of about $3 billion, including debt.

IAG has slowly been adding to the number of low-cost airlines in its group. It already owns low-cost Spanish carrier Vueling. And in March 2017, it launched a low-cost long-haul carrier — also based in Spain — called LEVEL.

Norwegian has rapidly been expanding its low-cost operations around the world, disrupting operations and putting pressure on legacy carriers, such as IAG’s own British Airways and Aer Lingus. The rate at which Norwegian has been growing has caused some financial trouble for it, too. The carrier reported a net loss of €30.8 million in 2017, compared to a €116 million profit in 2016. The loss was driven by significant costs associated with hiring in its expansion, as well as rising fuel costs.

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