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Sunday, June 16, 2024

Norwegian Air’s shares flying high

Share trading in Norwegian Air stock really took off again on Wednesday, still flying high on the prospect of a takeover bid for the airline from the owner of British Airways. Shares were up by another 7 percent after crossing the NOK 300 mark, and boosting the entire Oslo Stock Exchange to a new high.

Trading volume and prices for shares in Norwegian Air took off again on Wednesday, fueling speculation of a potentially hostile takeover. PHOTO: Norwegian Air

Newspaper Dagens Næringsliv (DN) noted how the sudden and strong investor interest in Norwegian Air pushed up the Oslo exchange’s main index to 846.70 by mid-morning, its highest level ever. Trading volume of Norwegian Air’s stock was even higher than that for Norway’s biggest company, Statoil.

It was all propelled by the latest news regarding what’s now shaping up as a hostile takeover bid for Norway’s international low-fare carrier founded by former Norwegian fighter jet pilot Bjørn Kjos: British Airways owner, International Airlines Group (IAG), has now reportedly hired investment bank JP Morgan to finance the takeover bid it announced it was evaluating last week. That comes after the same bank flagged that IAG’s ownership stake in Norwegian, initially announced at 4.6 percent, had risen to more than 5 percent.

Analysts have predicted IAG will boost its stake to 10 percent before initiating takeover talks with Norwegian. Kjos has already stated that he had never considered selling the stake he and board chairman Bjørn Kise control through their jointly owned NBK Invest AS. Kjos also stated that Norwegian Air’s shares have been “much too cheap,” while choosing to cite the old saying that everything is for sale at the right price.

Other investors in Norwegian clearly have considered selling off their stock and are doing so, with Wednesday’s burst of trading indicating that lots of shares are trading hands. Kise, meanwhile, was careful to note that the board he leads represents all shareholders in the question of whether it would negotiate any potential sale of the entire company.

Norwegian’s founder and CEO Bjørn Kjos (left) and his friend, fellow lawyer and board chairman Bjørn Kise currently control the airline. It’s unclear for how long. PHOTO: Norwegian Air

Both Kise and Kjos have caught criticism in Norway that built up this week over their control of the airline’s board. Kise has not only been its leader for the past eight years, while Kjos has the role of CEO: Kise also has headed the board’s election committee, meaning that he thus effectively nominates and can elect himself as board chairman.

The arrangement has assured Kjos and Kise of full control over Norwegian, which DN commentator Thor Christian Jensen has jokingly referred to as “Kjos and Kise Airlines.” Parent company Norwegian Air Shuttle, which is the target of IAG’s interest, has long made that possible through a special formulation in its bylaws that the board leader will also always lead the election committee.

Other shareholders exert some influence
DN reported on Tuesday, however, that investment fund DNB Norge, which has ranked as the airline’s fourth-largest shareholder with a 4 percent stake, has now prevailed with a demand that Kise no longer can automatically lead the election committee and elect himself. The board chairmanship is up for re-election at this year’s annual general meeting in early May, which is now likely to be lively.

Jarle Sjo of DNB Norge told DN that the fund raised the issue in connection with Norwegian Air’s recent attempt to raise NOK 1.5 billion in fresh capital. “The board members should be chosen by shareholders, and then it’s natural that they also choose who sits on the election committee,” Sjos told DN. “As a large owner, it’s important for us to carry out active ownership. The election committee has become an important channel for us to exercise such ownership.”

Norwegian’s board went along with the request on Monday, at least partially. It insisted, however, that Kise be guaranteed a spot on the election committee.

The second-largest owner of Norwegian Air Shuttle has been Norway’s state pension fund Folketrygdfondet, with a 5.6 percent stake. It also claims that the board and its election committee should be independent.  Pension fund representative Nils Bastiansen told DN that it would support DNB Norge’s proposal.

‘Pushing the process forward’
IAG had already become Norwegian Air’s third-largest shareholder as of earlier this week, before Wednesday’s heavy trading. It may now demand representation on the board, which currently has been mostly hand-picked by Kise and Kjos. Questions are rising over whether the two may lose their firm grip on the company, as what appears to be IAG’s carefully planned takeover drama continues.

“All indications are that IAG will push this process forward, whether it be friendly or hostile,” wrote Jensen in DN, noting that IAG’s decision not to inform Norwegian’s board of its initial share purchases and interest in the airline indicates that it may become hostile.

“The question is how much IAG will bid for Norwegian,” Jensen added, citing fresh speculation of share offers ranging from the current share price (NOK 308.50 at 11am Oslo time on Wednesday) to NOK 600 a share. Many analysts, including those at Arctic Securities in Oslo, are predicting a price of around NOK 450. Berglund



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