AirBaltic's acquisition by Lufthansa is commended by Latvia's Transport Minister
In a significant move, German airline giant Lufthansa has invested €14 million for a 10% stake in airBaltic, the national airline of Latvia. This investment, which is subject to regulatory approval, marks the beginning of a strategic partnership between the two airlines.
The deal, announced in a joint press briefing by the Latvian Transport Ministry, airBaltic, and the Lufthansa group, will see Lufthansa acquiring the stake through the purchase of convertible bonds. Once airBaltic completes its Initial Public Offering (IPO) and lists on the stock exchange, these bonds will convert into shares, granting Lufthansa a seat on airBaltic’s supervisory board.
Initially, Lufthansa will hold 10% of airBaltic's shares, with a representative joining the supervisory board. However, post-IPO, Lufthansa’s stake will change to between 5% and 10%, reflecting the company's ownership structure shift towards a more diversified shareholder base. The Latvian state, currently owning 97.97% of airBaltic's shares, will see its ownership reduced, while financial investor Lars Thuesen, who owns 2.03% through Aircraft Leasing 1, will also have a smaller share.
Estonia and Lithuania are expected to join this ownership restructuring, acquiring equity stakes on matching terms to those offered to Lufthansa. The exact details and sizes of these stakes will be determined during or following the IPO.
The investment is seen as beneficial for airBaltic, as it provides the company with more sustainable arguments in the eyes of investors due to aircraft lease agreements with Lufthansa. airBaltic's CEO Martin Gauss was absent from the briefing, but airBaltic's representative Vitolds Jakovļevs believes the deal is important for airBaltic to reach its goal of 100 aircraft.
Girts Rungainis, economist and partner at financial consultancy Prudentia, believes the bargaining process achieved a fair deal, considering the need to further develop the company. He states that the €14 million paid by Lufthansa for 10% of airBaltic shares is close to the best the Latvian company could have got.
Rungainis also emphasized that Lufthansa’s investment, being more than double the budget revenue of the Latvian state, will increase airBaltic’s value immediately. He predicts that the IPO will take place in the first half of the year, closer to the summer.
Despite critics suggesting that the deal seems small for airBaltic's significant stake in a company with a large fleet of modern aircraft, Rungainis believes an assessment of airBaltic's value at around 140 million euros is fair due to the company’s large debt portfolio.
The German Federal Cartel Office approved Lufthansa's acquisition despite competition concerns on certain routes, emphasizing the minority nature of the stake that does not confer control. The state remains committed to maintaining a 25% or blocking minority of shares in airBaltic.
Židkovs, a Latvian politician, believes the knowledge and collaboration opportunities Lufthansa will bring will drive airBaltic’s development. He notes that airBaltic contributes incomparably more to the Latvian economy than the state has ever invested in the company.
In summary, Lufthansa's investment in airBaltic marks a significant step towards regionalizing ownership and diversifying airBaltic's shareholder base. The deal is expected to boost airBaltic's value and provide the company with more sustainable arguments in the eyes of investors.
- The media reporting on the strategic partnership between Lufthansa and airBaltic mentioned that the EU finance industry will closely monitor the Initial Public Offering (IPO) of airBaltic, given the investment by the German airline giant.
- Latvian media outlets, along with their Estonian and Lithuanian counterparts, have expressed interest in the number of news and business segments, as these countries plan to join the ownership restructuring of airBaltic, acquiring equity stakes similar to the one purchased by Lufthansa.
- In addition to the commercial aviation sector, the strategic partnership between Lufthansa and airBaltic is perceived as advantageous for the broader industry, as it demonstrates the potential for cross-border investments and collaboration in the European Union's transport and media industries.
