Lufthansa buys the remaining 55% of Brussels Airlines

[Conti764]

Well negociated by LH... But hey, that's what they are Germans for, no?

Honestly, I don't care about what the Belgian shareholders might get for their airline. All I care about is what consequences this (probable?) purchase next week will have on the company and its employees... Which role will SN play in LH's plans? Which role will BRU play?

[Airbus330lover]

Well negociated by LH... But hey, that's what they are Germans for, no?

Honestly, I don't care about what the Belgian shareholders might get for their airline. All I care about is what consequences this (probable?) purchase next week will have on the company and its employees... Which role will SN play in LH's plans? Which role will BRU play?

The main reason for the shareholders was not to make money, but to maintain jobs and traffic at BRU.
The result is far from bad.
Good job, it was not so easy

[sn26567]

I don't care about what the Belgian shareholders might get for their airline.

I do care. One of the shareholders is my former employer who pays a part of my pension and was enlisted in the salvage of a Belgian airline by Davignon and Lippens after the demise of Sabena. Another shareholder is the regional government of my region. And still another one is Brussels Airport. All of them want to see their money back, and it is in my own interest that they do get their money back.

I have also confidence in Davignon to negotiate a good deal, not only for SN, but also for the current shareholders.

Brussels Airport can still put some pressure on LH by all kinds of means and tricks, and they certainly have to power to get back their investment.

[Flanker2]

I also don't think that the shareholders will give up SN for that little without a serious fight.
If there weren't the attacks, SN would have made 100 millions this year according to my estimates.

Some goodwill will have to be paid on behalf of LH, together with the brand guaarantees.

BRU and the government can make life tough on LH. But on the flip side, LH would take any pressure from them to justify a downsizing of SN, so it's safe to say that LH has the upper hand.
Gustin is the banker in this entire mess. He's one of the guys who has helped raise the funds to establish SN.
It's hard for me to understand that as one of the fundraisers, he didn't negotiate a deal that would safeguard the jobs and the security of the airline that he helped create (or save in the Sabena collapse aftermath).

So it comes down to what will LH do and how is the workforce going to go along with it.
In the end, once the Belgian shareholders are out, the only remaining party with a real bargaining power will be the workforce, through the unions. It's going to be tough though, because there too, LH could use any fight as a reason to downsize the airline and transfer operations to German crews/staff under EW.
Kind of like "either you become EW, or we'll replace you by EW".

In the end, as I've said for a long time, what SN is doing today out of BRU to Africa, LH can do from FRA or any of their hubs.

But despite all of this, I will believe it when it's announced. I still think that another extension is most likely.


A little addendum: in theory I think that the majority shareholders can reject the execution of the exercise of options. LH would have to sue and won't get more out of it than the direct damages, ie the total price they paid for SN so far + the exercise price.

[lumumba]

I don't care about what the Belgian shareholders might get for their airline.

I do care. One of the shareholders is my former employer who pays a part of my pension en was enlisted in the salvage of a Belgian airline by Davignon and Lippens. Another shareholder is the regional government of my region. And still another one is Brussels Airport. All of them want to see their money back, and it is in my own interest that they do get their money back.

I have also confidence in Davignon to negotiate a good deal, not only for SN, but also for the current shareholders.

Brussels Airport can still put some pressure on LH by all kinds of means and tricks, and they certainly have to power to get back their investment.

Side note: if your former company was Fortis no problem they played with our money on very dengerous investments and burn the money.
This small investment was sure smarter and created work...

[LJ]

I also don't think that the shareholders will give up SN for that little without a serious fight.If there weren't the attacks, SN would have made 100 millions this year according to my estimates.

Do you really think the LH Group shareholders would approve such a gesture? No way.

Some goodwill will have to be paid on behalf of LH, together with the brand guaarantees.

Yet, the initial 39.4mln will go to Richard Branson (if this is correct), hence why they won't pay more. LH Group will probably say that they will invest into SN and something else, but the shareholders won't see anything (unless they find a very creative way to get around of Richard Branson).

It's hard for me to understand that as one of the fundraisers, he didn't negotiate a deal that would safeguard the jobs and the security of the airline that he helped create (or save in the Sabena collapse aftermath).

He may have tried, but it's wasn't a seller's market at the time. You can also argue that despite this not being a good deal it was probably the best he could get.

Brussels Airport can still put some pressure on LH by all kinds of means and tricks, and they certainly have to power to get back their investment.

They don't have this power if there is no contractually obligation for LH to pay more. If they start bullying LH they'll get sued and it will cost them more than the lost investment. In the end, if you signed a contract you should expect this contract will be enforced. You can try, but one should't expect anything from LH.

[Inquirer]

Just a few remarks, if I may:

1- Discussing a financial resolution between shareholders in a topic about the finances of their company is understandable, yet not very appropriate since the 2 are not related.
Whether one shareholder pays say 2 million or 2 billion into the bank accounts of the other shareholders in order to buy them out, none of that money goes to the company itself, so it does have no material impact.
Maybe it's time for a new topic: "Lufthansa's call on Brussels Airlines", or something?

2- I am having a strong feeling De Tijd doesn't have the full picture, leading them to prematurely draw rather blind sighted conclusions over the correctness of the valuation, which -I notice- is causing a lot of commotion.
In this context, it's interesting to note the loan from Lufthansa dates from the end 2012, yet the price formula was reportedly fixed already right at the time of the initial share purchase in 2008.
As such, it can hardly have included provisions for this particular case, and this case alone, can it?
My take is the debts deducted from the gross valuation of the airline are far more than just the outstanding €45M of the loan from 2012, like De Tijd is focusing on.
A fair bit of guessing on my side, but aren't there also the initial investment loans from the Federal Participation Company which were rolled over into long standing debt contracts?
And then there's the provision for the security tax breaks granted by Brussels Airport, each year booked under provision in their annual accounts.
Not to mention we don't know what the financial result over 2016 will be, but I can image the tragic events from March to have wiped away quite a bit of money too.
I am currently too lazy to check the most recent balance sheet of the holding, but I do remember there being much more debt on those sheets than just 45M like was focused on here now, so if the gross value of the holding's is what it is, then a fairly significant sum still needs to be deducted from that, much more significant than just those €45M from the shareholder's loan like some did (including De Tijd).

3- let's not feel too pitiful for the current shareholders: it was widely reported they all got a very favourable fiscal ruling in 2002 which allowed them to retro-actively deduct their full investment from their profit statement over 2001, a fiscal present one can normally only dream about!

4- payment can come in other form than just money too, of course.
I am for instance fairly certain Brussels Airport -or other investors with interest beyond just finances alone, like the regional governments and other Belgian stakeholders- will be far more interested in the industrial project Lufthansa may have in mind next and all that comes with it, rather than in a couple of extra millions and as an aviation enthusiast, I have to say, so am I, in fact. Given their historic reason to invest, they may even be willing to forego on the extra cash money, should it allow them to help steer this project.

5- The only one not very happy with the outcome may prove to be Virgin's R.Branson: the others, I am less sure. In fact, it may actually have been in the interest of both Lufthansa as well as those Belgian shareholders I talked about above in point 4 to organize a little leak to the press concerning the valuation issues, like was clearly done. The message being there's nothing to be earned because of past indebtment and how sad and unfair it all is, also to them... whereas they are not even half as sad as Branson will be. Not saying I know anything more, just saying there's much more to this than we only know and so clearly one should ask the question whether if what we do know, we didn't get to know on purpose, and if so, what that purpose could possibly have been then?

[sn26567]

if your former company was Fotris ...

No, it was not Fortis. Industrial companies also participated!

[A330]

I also think there should be more to it. If true it seems to say the majority shareholders are terrible at negotiating, and the LH people on the board did not really play the game nicely.
Why would this come out now? Suddenly LH want to buy at this price, whereas the info we get indicates this price would have been fixed already for years, since the loan was granted? I get the impression this is part of the negotiations, perhaps in return for keeping the SN brand?
Let's hope it's not all like that and that LH have serious plans for SN.

[Passenger]

Thanks Inquirer, good to see that realism has returned here.

The figures from L'Echo / De Tijd about the remaining amount of the loan (LH-> SN) do not match with the figures in the annual account 2015, published on 01st July 2016.

The figures from L'Echo / De Tijd about the take over amount (that 2,6 mio) seems to exclude the outstanding loan, and seems to exclude the cumulated result from the past. The figures are in the annual account 2015.

[sn26567]

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[LJ]

In this context, it's interesting to note the loan from Lufthansa dates from the end 2012, yet the price formula was reportedly fixed already right at the time of the initial share purchase in 2008.
As such, it can hardly have included provisions for this particular case, and this case alone, can it?

Not in 2008, but the 2008 agreement can be amended. It's quite plausible that the price formula has been adjusted to include provisions as described due to the new situation. This is not uncommon.

I am currently too lazy to check the most recent balance sheet of the holding, but I do remember there being much more debt on those sheets than just 45M like was focused on here now, so if the gross value of the holding's is what it is, then a fairly significant sum still needs to be deducted from that, much more significant than just those €45M from the shareholder's loan like some did (including De Tijd).

You're right on his on. As soon as LH Group takes over, it ultimately takes not only all of its debt but all other obligations (including e.g. retirement obligations). However, aside for funding costs to repay the debtors (if this is required by the loans granted to SN) almost nothing will change on SN's balance sheet. All debt and obligations will probably remain on SN's books as it will remain a seperate entity. The same for all other liabilities and assets (unless the agreement will include transfer of these assets or liabilities). It's therefore more interesting to see how LH Group will take over SN (trnasfer of assets/liabilities) than the actual take over price.

[LJ]

Why would this come out now? Suddenly LH want to buy at this price, whereas the info we get indicates this price would have been fixed already for years, since the loan was granted?

That can be explained easily. LH Group's shareholders didn't want another loss making airline on their balance sheet and thus LH didn't take over until they could sell the take over it to its shareholders. This take over is not only about SN, it's also about LH Group and its shareholders. Moreover, they had other priorities and if the take over amount was given, it could wait (why would you take on all the extra liabilities and obligations when you don't need to?). Now OS is running and EW is flying, there is maybe a (strategic) need to lock in SN. If you're really cyncical, one could argue that LH feared that SN would repay the outstanding on the credit line in the near future and thus acted to prevent the provision to expire.

[Flanker2]

If we may believe the media reports, this is shaping up to be a hostile take-over by LH.
Interesting times, but I'll still believe it when I see it.

[LJ]

If we may believe the media reports, this is shaping up to be a hostile take-over by LH.
Interesting times, but I'll still believe it when I see it.

You do know definition of "hostile takeover"? This is not a hostile takeover as the management agrees with the takeover (or better already agreed when they gave LH the option to purchase the remaining shares). Only the current shareholders may object to the takeover, but they don't have much choice.

[nordikcam]

http://www.lalibre.be/economie/libre-en ... 4e720ce3c4

Does someone has access to this article ? Thanx a lot !

[sn26567]

http://www.lalibre.be/economie/libre-en ... 4e720ce3c4

Does someone has access to this article ? Thanx a lot !

Nothing really new, compared to what has been written above. Except that:

1. The Belgian directors of SN Airholding refuse to sell to LH if the price remains at 2.6M€, but not sure they can really oppose to the deal. Nevertheless, LH could seek their approval (and thus improve the conditions) to remain safe on the legal side.

2. Davignon will remain on the board for at least two years after LH buys the remaining 100%. A good sign...

[Boavida]

De Tijd & L'Echo announce it's 'D-Day' for Brussels Airlines. Today, LH will decide about the takeover. They also mention that the majority of Belgian shareholders does NOT agree with the takeover plan.

FR: http://www.lecho.be/entreprises/aviatio ... 1474970611
NL: http://www.tijd.be/ondernemen/luchtvaar ... 1474970905

This sounds very, very bad. This could be the day we lose Brussels Airlines

[Conti764]

De Tijd announces it's 'D-Day' for Brussels Airlines. Today, LH will decide about the takeover. They also mention that the majority of Belgian shareholders does NOT agree with the takeover plan.

This sounds very, very bad. This could be the day we lose Brussels Airlines

According to the article, the rejection of the take over by a number of shareholders has nothing to do with whatever LH has in mind for SN, but because they are (understandably) not thrilled about the fact they get near scratch for their shares.

The article however repeats that it's Carsten Spohrs wish to completely integrate SN in to EW, and that it actually doesn't make sense to maintain a seperate structure for an airline flying 'only' 49 planes...

And it seems the unions are getting strapped for whatever follows.

[airbuske]

We can speculate but I think we have to wait for the official statement after a take over.

I think the most import for LH is the price and for SN the plane behind all.