Air Berlin to acquire LTU

Air Berlin has agreed to acquire 100 percent of LTU for € 140 million in cash plus the assumption of between € 190 and 200 million of net financial debt. (3/27/2007)The agreement is conditional on the approval of the German Federal Cartel Office. The acquisition will be financed in the near future primarily through the issuance of equity and convertible bonds in a total amount of approximately €250 million. The issue of shares will be for up to 10 percent of the existing share capital and the larger portion of the financing will be in the form of convertible bonds. In addition to funding part of the purchase price, the proceeds from this financing will be used for the refinancing of approximately €100 million of LTU’s debt and approximately €50 million of Air Berlin’s debt. “With the acquisition of LTU we are reacting to demands from the market. Many of our customers, who especially appreciate our good service offering, have been asking us for many years to start offering long-haul flights. This is now possible for us, as we have the necessary feeder network through our European and domestic German connections,” said spokesperson Joachim Hunold. Hunold expects the integration of LTU into the Air Berlin Group to yield synergies of between €70 and 100 million. The airline identified joint purchasing and marketing, flight schedule harmonization and cost reduction through volume discounts at airports as “key drivers” to obtain these synergies. Although restructuring measures cannot be excluded, the acquisition does not aim to curb manpower at LTU. LTU will remain a legally independent company within the Air Berlin group, with its own management. The LTU name will also be retained in the foreseeable future. However, there will be a seamless integration of LTU’s routes into Air Berlin’s network in the European market. At present, LTU operates 15 medium range and 11 long range aircraft. Its most important destinations are the Dominican Republic, the United States, Thailand, the Canary Islands, Northern Africa and Turkey. The company had 2.244 employees as per 31 December 2006 and carried 5.3 million passengers last year. Air Berlin carried 16.8 million passengers in the same period, operates 93 aircraft and currently employs about 4,000 people. Through the acquisition of LTU, Air Berlin will become the fourth largest airline for European traffic, behind Ryanair, Air France/KLM and Lufthansa. One of the primary motivations for the acquisition was the possibility to improve Air Berlin’s position at Dusseldorf airport, according to Hunold. “The catchment area of Dusseldorf airport is the most important market in Germany and the second most important in Europe, behind London. We would not have been able to grow at this airport organically, due to the limitation of departure slots,” Hunold said.

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