Norwegian Air Says Two IAG Takeover Offers Undervalued Company

(Bloomberg) -- Low-cost airline Norwegian Air Shuttle ASA rejected two takeover proposals from IAG SA because they undervalued the carrier, and the suitor said it’s considering options on how to proceed.

Norwegian shares fell as much as 12 percent, cutting its market value to about $1.5 billion, after the owner of British Airways, said in an earnings presentation Friday that its approaches had failed to yield a deal.

“These proposals were reviewed in conjunction with financial and legal advisers, and were unanimously rejected on the basis that they undervalued NAS and its prospects,” Norwegian said in a statement. “The board of NAS remains fully committed to delivering on its stated strategy, for the benefit of all NAS shareholders.”

IAG revealed last month that it had bought a 4.61 percent stake in Norwegian to initiate bid discussions with the Scandinavian discount specialist, which is struggling with a stretched balance sheet. Norwegian initially said it had no interest in a takeover before moderating its stance and appointing advisers to consider approaches.

“IAG confirms that it has had contact with the Norwegian board regarding a possible offer, without reaching an agreement,” the London-based carrier said in an earnings slideshow after posting a first-quarter profit that beat estimates and issuing a bullish outlook for the rest of the year. IAG is now considering its options, it said.

Shares of IAG rose 5.6 percent to 676.40 pence at 9:23 a.m. in London, valuing the group at 13.9 billion pounds ($18.9 billion). Norwegian Air fell 8.9 percent to 274.50 kroner, cutting the market value to 12.2 billion kroner ($1.5 billion).

IAG Chief Executive Officer Willie Walsh, speaking on a conference call, declined to comment on the status of a possible deal.

IAG increased first-quarter operating profit 75 percent to 280 million euros ($335 million), beating the 194 million-euro estimate of analysts, and said its earnings are set to increase for 2018 as a whole.

Benign Backdrop

Like rival network operators, IAG is benefiting from a period of increasing demand, with ticket prices rising even as carriers add capacity. The company said in a statement Friday that passenger unit revenue, a measure of fares, advanced 3.5 percent at constant currencies. The improving market presents a benign background to IAG’s possible bid for Norwegian Air.

Taking out Norwegian would eliminate a competitor that’s shaken up the airline industry with low-cost long-haul flights, giving IAG access to a young fleet with fuel-efficient jets that have opened the way for new routes, albeit at considerable cost to the company.

The CEO was upbeat about IAG’s in-house long-haul discount operation Level, saying it had turned in a “very strong performance,” with trans-Atlantic routes popular in both directions. Irish unit Aer Lingus is also doing well, he said.

©2018 Bloomberg L.P.

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