Icelandair’s Purchase Of Wow Delayed & Submits Binding Bid For 51% Stake In Cabo Verde Airlines

Icelandair made an announcement earlier this month that it had reached an agreement to acquire its Icelandic rival Wow air for $18 million pending shareholder approval. There appears to be a delay completing the required due diligence and the deal won’t close as planned.

Cabo Verde Airlines

On Friday afternoon, Icelandair issued a press release that it had submitted a binding offer through a subsidiary for 51% stake in Cabo Verde Airlines based in Cape Verde.

Here’s the short statement that Icelandair has released regarding the Wow:

Icelandair Group Shareholders´ Meeting on November 30th 2018

Icelandair Group has convened a shareholders´ meeting on November 30th. At the meeting, Icelandair Group’s shareholders will decide on whether the acquisition of WOW air hf. will be approved. The share purchase agreement contains numerous conditions which will have to be fulfilled before the meeting. At this moment, Icelandair Group estimates that it is unlikely that all of the conditions will be fulfilled by that time.

The company will continue to work on the transaction and the parties are continuing dialogue on next steps.

And here their statement about Gabo Verde Airlines:

Loftleidir Icelandic’s subsidiary submits binding offer for majority shares of Cabo Verde Airlines

Loftleidir Icelandic, a subsidiary of Icelandair Group, will, together with Icelandic investors, submit a binding offer for a 51% of the shares in Cabo Verde Airlines on Cape Verde. Authorities in Cape Verde and Loftleidir Icelandic have been cooperating for some time. In August 2017, Loftleidir Icelandic signed a management agreement with the Cape Verde Government on restructuring Cabo Verde Airlines. The agreement also aimed to strengthen the international airport in Cape Verde, to develop the islands as a promising tourist destination and to build an international hub for connecting flights. Coinciding with the agreement, it was announced that the company was due to be privatised. Cabo Verde Airlines already has operating licenses to fly scheduled flights to Europe and the United States.

The purchase price is confidential. However, the acquisition would partly be paid for by the work already completed by Loftleidir Icelandic’s employees. The acquisition is made through a new company, Loftleidir Cabo Verde. Loftleidir Icelandic holds a 70% stake in the company, and other investors 30%. Loftleidir Icelandic’s acquisition of Cabo Verde Airlines does not have significant effect on Icelandair Group’s financial statements since Cabo Verde Airlines will not be reflected in the group’s consolidated financial statements. The share will classified as an associated company.

Árni Hermannsson, Managing Director of Loftleidir Icelandic:
“The participation in the acquisition of a majority share in Cabo Verde Airlines holds great opportunities for Loftleidir Icelandic, especially in light of the expected growth in passenger demand in Africa in the coming years. We have already participated in the restructuring of the company, and Cabo Verde Airlines’ operations are well suited to Loftleidir Icelandic’s projects around the world. The knowledge and experience already available within Loftleidir Icelandic and its sister companies has come to good use in restructuring the company and will continue to assist in further developments. Further opportunities are related to shared use of airplanes from Icelandair Group’s fleet, and crews where applicable, as is already being done in various projects. In developing connecting routes, we can also draw further on Icelandair’s experience. In the case of Cabo Verde Airlines, we have opportunities for well-organized connecting routes between Europe and South America on one hand, and West Africa and North America on the other, along with West Africa and Europe. The island’s location is ideal for developing connecting flights.”

Conclusion

Interesting to see if these “conditions” will prevent Icelandair taking over Wow air as planned or what the outcome will be. Wow was in financial trouble and had trouble selling its bonds this fall to fund operations.

Not sure what expertise Icelandair has operating flights in West Africa? Their plan is to turn this small islet to small Keflavik for flights between Southwest Europe and Northeast Brazil and Western Africa and Northern America. Only time will tell….

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