British Airways Owner IAG Weighs Takeover Bid for Norwegian Air

IAG SA said it’s considering acquiring Norwegian Air Shuttle ASA in a potential deal that would help the owner of British Airways boost its market share amid intensifying competition from low-cost carriers.
IAG acquired a 4.61 percent stake in the airline and said it’s considering a takeover offer after Bloomberg News first reported that the British company was weighing a bid. Shares of Norwegian Air soared by a record 26 percent on Thursday. A potential acquisition could value the Norwegian company, which has a market value of more than $1 billion, at about $3 billion including debt, people with knowledge of the matter said, asking not to be identified because the deliberations are confidential.
IAG said it considers Norwegian to be an “attractive investment.” According to a statement, “the minority investment is intended to establish a position from which to initiate discussions with Norwegian, including the possibility of a full offer.” Representatives for Norwegian Air declined to comment.
Adding Norwegian would jolt IAG’s foray into low-cost, long-haul service into hyperdrive. The owner of British Airways has already expanded its discount Level and Aer Lingus long-haul divisions, while adding European airport slots from failed U.K. rival Monarch Airlines. In February, IAG predicted higher earnings this year as prices gain, costs fall and the group expands capacity for Level.
Bjorn Kjos
Photographer: Chris Ratcliffe/Bloomberg
“Everybody in Europe wanted to buy us,” Norwegian Air CEO Bjorn Kjos said in an interview this month. But the company has been investing in its aircraft, and he wouldn’t consider selling the business until the investments start paying out, he said. “If you decide to sell, that is when you take in other investors, but that has not been on our agenda at all.”
Shares of Norwegian Air soared as much as 26 percent, the most in its history, before trading was halted in Oslo, boosting its market value to about 8.2 billion kroner ($1.05 billion). The stock had earlier jumped about 10 percent this week, erasing some of last year’s 39 percent rout.
Shares of SAS AB, the Nordic region’s biggest mainline carrier, rose as much as 6.6 percent in Stockholm on the news, valuing the company at 8 billion kronor ($749 million).
The European airline industry is poised for a further round of consolidation. Alitalia SpA has attracted interest from a host of European rivals including budget carrier EasyJet Plc and Deutsche Lufthansa AG as part of a government-led rescue effort. That comes on top of EasyJet’s successful bid for defunct Air Berlin’s operations at Tegel Airport. Meanwhile, SAS AB, the Nordic region’s biggest network airline, plans to standardize its fleet to cut costs as it positions itself for an industry shakeup.
Norwegian Air’s aggressive foray into low-cost intercontinental flights has disrupted the market and forced bigger industry players like British Airways and Air France to take measures to woo travelers. But the company’s finances have been stretched, prompting Norwegian to take steps to raise or preserve cash -- including selling some of its brand-new planes.
IAG said in the statement that no discussions have taken place to date and “that it has taken no decision to make an offer at this time and that there is no certainty that any such decision will be made.”