LONDON – Norwegian’s shares have surged as much as 12% today following the news that Lufthansa is considering a potential takeover.
The German carrier’s CEO, Carsten Spohr, confirmed that he is discussing a takeover with Norwegian.
Lufthansa told the Süddeutsche Zeitung that a bid would be made “pending on price and strategic value” for Norwegian.
Norwegian’s stock had flown through the roof in recent months, especially in April, when the airline revealed additional interest from IAG, who seemed determined to make a full offer for the carrier.
Norwegian’s trades climbed up to 9.9% higher at 273.50 Norwegian kroner, valuing the airline at 12.1 billion kroner (USD 1.5 billion).
Lufthansa Fights For The LCC Segment
Lufthansa’s Spohr told the German media that “everybody is speaking with everyone else in Europe, and that means we are also in contact with Norwegian. When it comes to acquisitions, there are no easy answers.”
From Norwegian’s side, its CEO Bjorn Kjos is taking a quite an open approach to these takeovers. He said he would be open to doing a deal as long as it is on the right terms and value.
With Lufthansa’s interest, IAG could face a tough bid battle to take over the esteemed low-cost carrier.
Currently, IAG owns a 4.6% stake in Norwegian. The owners of British Airways, Iberia, Vueling, and Aer Lingus, would see Norwegian as a perfect addition to its portfolio.
But with Lufthansa looking to strengthen its presence in the European marketplace, a bidding competition might be right around the corner.
The German carrier already operates a low-cost/long-haul operation through its subsidiary Eurowings. Matching it with Norwegian’s extensive network might capture a larget share of the market and increase the group’s footprint around the globe.
On IAG’s side, they run low-cost/long-haul flights through their subsidiary LEVEL. Although not as substantial and significant in size as Eurowings, they pose a potential threat for this segment against Lufthansa’s group.
Moreover, these two airline groups will step forward to dominate the low-cost/long-haul segment, leaving behind Air France’s Joon, which continues to lack a concise business plan to properly compete against IAG and Lufthansa.
Norwegian Keen But Careful
“Norwegian confirms that it has received inquiries from several parties following IAG’s acquisition of shares in the company,” said a company’s spokesperson. “These parties have expressed indicative and preliminary interest in share acquisitions, mergers, structured transactions, financing of the group and various forms of operational and financial cooperation.”
Any potential deal, from both IAG and Lufthansa, will be subject to anti-trust and government approvals.
Overall, the low-cost/long-haul competition in Europe is growing strong. Both Lufthansa and IAG will fight to get that Norwegian share of a segment in which margins and dominance go hand-in-hand.
Written by James Field and Enrique Perrella