Norwegian Air stock was in a tailspin Friday morning after news broke that the airline’s board had received and rejected two “separate conditional bids” from International Airlines Group (IAG), which owns British Airways. IAG offered to take over the entire company, but failed with both bids.
That sent the value of Norwegian Air shares, which took off last month when IAG confirmed its interest in the company, diving on the Oslo Stock Exchange. They were down by nearly 10 percent by mid-morning, but still up 61.2 percent from last month before IAG put the stock into play. Share value recovered later in the morning, down 7.78 percent to NOK 277.30 just before 11am, but was down 9.78 percent just after, to NOK 271.30, an hour later.
IAG reported in its first-quarter results release that it had taken contact with the board of the airline formally listed as Norwegian Air Shuttle (NAS), reflecting its origins in the 1990s as a local airline on Norway’s west coast. It later grew into a major domestic competitor for Scandinavian Airlines (SAS), expanding later with European and, most recently, intercontinental routes.
IAG stated that it informed Norwegian’s board of a possible offer, without reaching agreement. IAG said it was now “evaluating” its possibilities regarding an attempted acquisition of Norwegian.
Norwegian confirmed in a report of its own to the Oslo Stock Exchange on Friday morning that it had received two bids from IAG for the entire company, subject to various terms and conditions. The board, dominated by the airline’s founder and CEO Bjørn Kjos and his co-investor Bjørn Kise, was dissatisfied with both and “unanimously” voted them down.
“These proposals were reviewed in conjunction with NAS’ financial and legal advisers, and were unanimously rejected on the basis that they undervalued NAS and its prospects,” the airline stated in its report and press release. It added that Norwegian Air’s board “remains fully committed to delivering on its stated strategy, for the benefit of all NAS shareholders.”
That means initial conversations between NAS and IAG were not successful. Newspaper Dagens Næringsliv (DN) reported that Norwegian Air has hired Goldman Sachs in London as a financial adviser and Oslo law firm BA-HR as legal adviser in the case.
IAG ‘not going after’ other airlines
Financial news service TDN Direkte reported that Willie Walsh, chief executive of IAG, told an analyst that while contact with the board of Norwegian Air didn’t lead to any negotiations, “we are not actively looking” at other potential takeover targets. He also claimed that “weak” airlines were looking weaker and that IAG predicts they will fall in further difficulties with higher fuel prices, suggesting some airlines “will leave the market.” Walsh repeated that “we’re not going after other targets.”
That may indicate IAG will come back with another bid. Asked whether he thinks Norwegian Air can continue with its massive intercontinental growth program on its own, Walsh replied “no.” Norwegian Air has been plagued in recent years by a pilots’ strike, other labour disputes, technical problems with its fleet of new Boeing 787 Dreamliner jets and heavy debt tied their acquisition, along with waves of customer complaints after passengers have been stranded because of Norwegian’s lack of crews, back-up aircraft or membership in an airline alliance that could provide more support.
It remained unclear whether IAG will now retain its stake in Norwegian Air or sell out. Norwegian claimed in its own report of weak first-quarter results last week that it had received other inquiries after IAG bought into Norwegian.
Kjos and Kise still control nearly 40 percent of NAS’ stock and Kjos has claimed that he had no intention of selling out. Kjos allowed, however, that it “was nice that folks want to buy shares” in the airline he founded and cited the old saying that everything was for sale for the right price. The price IAG offered was clearly not right in his eyes, at least not yet.