# IAG agrees to buy 80% stake in Air Europa for 400 million euros
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-02-24
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: IAG Acquires Air Europa for 400 Million Euros
Meta Description: Iberia-owner IAG purchases remaining 80% of Air Europa for €400 million to strengthen Latin American market and compete in Europe. Deal includes cost cuts and
URL: https://financedigest.com/iag-agrees-to-buy-80-stake-in-air-europa-for-400-million-euroshtml

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By Charlie Devereux

MADRID (Reuters) -Iberia-owner International Airlines Group has agreed to pay 400 million euros ($423.84 million) to Spain’s Globalia for the remaining 80% of airline Air Europa it did not already own, the company said in a statement on Thursday.

IAG, which also owns British Airways, said the deal will allow it to improve its position in the Latin American market and expand into Asia, while allowing its Madrid hub to compete with other major airports in Europe.

Air Europa, which will [maintain its brand](https://www.financedigest.com/how-a-british-brand-catered-to-hnwis-can-maintain-its-position-within-the-global-luxury-sphere-and-even-grow-in-these-current-circumstances.html "How a British brand catered to HNWIs can maintain its position within the global luxury sphere, and even grow, in these current circumstances") but will be managed by Iberia, owns 50 planes and has a further 15 on order, the company said. Its fleet consists of Boeing 787 Dreamliners and Boeing 737s, Globalia said in a separate statement.

IAG said the acquisition will allow it to achieve significant [cost cuts](https://www.financedigest.com/gms-cruise-to-focus-on-cost-cuts-as-it-ramps-up-robotaxis.html "GM’s Cruise to focus on cost cuts as it ramps up robotaxis") that it expects to bear fruit between 2026 and 2028 if the deal is finalised in the next 18 months.

It said the first 200 [million euros](https://www.financedigest.com/germanys-merck-to-invest-300-million-euros-in-us-gas-plant.html "Germany’s Merck to invest 300 million euros in US gas plant") will be paid once the deal gets the go-ahead from antitrust authorities. Another 100 million euros will be paid in IAG [shares](https://www.financedigest.com/mercedes-benz-to-buy-back-up-to-4-billion-euros-in-shares-by-2025.html "Mercedes-Benz to buy back up to 4 billion euros in shares by 2025") while the final 100 million euros will be paid in cash.

Many of Europe´s legacy airlines, hampered by weak [balance sheets](https://www.financedigest.com/decoding-balance-sheets-analyzing-assets-liabilities-and-equity.html "Decoding Balance Sheets: Analyzing Assets, Liabilities, and Equity"), are struggling to compete with budget airlines. That will inevitably lead to a period of consolidation, Ryanair [Chief Executive Office](https://www.financedigest.com/iris-software-group-names-matt-tuson-as-chief-revenue-officer.html "IRIS Software Group names Matt Tuson as Chief Revenue Officer") Michael O’Leary told Reuters earlier this month.

The protracted takeover began in 2019 when IAG announced it had agreed to buy its smaller rival for 1 [billion euros](https://www.financedigest.com/eu-seeks-clarification-on-italy-post-covid-plan-freezes-19-billion-euros.html "EU seeks clarification on Italy post-COVID plan, freezes 19 billion euros") with the goal of building a big hub in Madrid, but the COVID pandemic and antitrust concerns derailed the merger.

As the pandemic tipped the airline industry into crisis, hitting Air Europa particularly hard, shareholders in both companies agreed to [cut the deal’s price](https://www.financedigest.com/tesla-posts-record-quarterly-deliveries-after-price-cuts-up-4-from-q4.html "Tesla posts record quarterly deliveries after price cuts, up 4% from Q4") tag to 500 million euros.

Spain’s [government approved a 475-million euro rescue](https://www.financedigest.com/italys-rightist-government-tightens-rules-for-migrant-rescues.html "Italy’s rightist government tightens rules for migrant rescues") package for Air Europa in November 2020, a part of which could be converted into equity, meaning the Spanish government has also been involved in the talks since then.

Negotiations had all but ground to a halt until March 2022 when IAG agreed to grant [Air Europa a 100 million-euro loan convertible into a 20% stake](https://www.financedigest.com/stellantis-to-build-u-s-firm-archers-air-taxi-up-stake.html "Stellantis to build U.S. firm Archer’s air taxi, up stake").

($1 = 0.9438 euros)

(Reporting by Charlie Devereux, editing by Andrei Khalip and Nick Zieminski)


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