Lufthansa to sell BMI stake.
Thread Starter
Lufthansa to sell BMI stake.
This article in today's Telegraph will fuel the rumours of a Virgin Atlantic takeover.
Lufthansa has another go at bailing out of Bmi
By Alistair Osborne, Associate City Editor_(Filed: 25/01/2005)
German flag-carrier Lufthansa is trying again to engineer the sale of Bmi British Midland in a bid to get out of a secret shareholder agreement which could force it to buy the UK airline this year.
Lufthansa, which owns 30pc minus one share of Bmi, has approached Virgin Atlantic and BA offering the airlines its stake. The timing is significant in what is set to become an aviation poker game.
Lufthansa acquired its initial 20pc stake in Bmi for £91.4m in 1999, in a deal valuing Bmi at £457m. It raised its holding to just under 30pc.
At the time of the 1999 deal, Lufthansa signed a shareholder agreement with Bmi chairman Sir Michael Bishop, 63, who controls 50pc of the airline plus one share. Scandinavian carrier SAS owns the other 20pc. The agreement, thought to run for about 10 years, gives Sir Michael a "put" option, enabling him to sell his controlling stake to Lufthansa for about the same price as it paid for its shares in 1999. This would value the holding controlled by Sir Michael at £229m.
It is understood that 2005 is the first year when Sir Michael can exercise this option. He can exercise it later, though the price is said not to be "materially different", should he wait. Yesterday, Sir Michael would only say: "I have never discussed the shareholder agreement and I don't intend to now." Asked if he had any plans to sell Bmi, he said: "You are asking questions I have no intention of answering."
Alongside the shareholder agreement, Bmi, Lufthansa and SAS also signed an operating joint-venture for routes between the UK, Germany and Scandinavia. Revenues and costs are pooled, with Lufthansa taking the biggest share of profits and losses. This agreement has proved expensive for Lufthansa, whose new chairman and chief executive, Wolfgang Mayrhuber, wants to offload the Bmi stake.
Last year, Lufthansa reported €76m (£53m) losses from its interest in Bmi, including a €66m goodwill write-off, up from €66m losses the previous year when Lufthansa wrote down €53m. Lufthansa hopes a putative deal to sell its stake and possibly SAS's would trigger a take?over of Bmi, enabling it to get out of the shareholder agreement.
Virgin, which held abortive merger talks with Bmi in May 2003, and BA are the logical buyers. Bmi has 14pc of Heathrow take-off and landing slots and a short-haul network. BA, with 40pc of the slots, would face competition issues buying Bmi.
For years, Sir Michael has waited for an "open skies" pact between Europe and America, which would increase the value of Bmi's Heathrow slots but such a politically sensistive deal may still be years away.
A Virgin spokesman said: "We have always said we think there is a deal to be done between ourselves and British Midland."
A BA spokesman said: ``We receive many approaches each year from potential sellers but have a long-standing policy of not commenting on speculation about possible investments."
Asked if it was trying to sell its Bmi stake, a Lufthansa spokesman said: "It's pure speculation. We have no comment to make."
Lufthansa has another go at bailing out of Bmi
By Alistair Osborne, Associate City Editor_(Filed: 25/01/2005)
German flag-carrier Lufthansa is trying again to engineer the sale of Bmi British Midland in a bid to get out of a secret shareholder agreement which could force it to buy the UK airline this year.
Lufthansa, which owns 30pc minus one share of Bmi, has approached Virgin Atlantic and BA offering the airlines its stake. The timing is significant in what is set to become an aviation poker game.
Lufthansa acquired its initial 20pc stake in Bmi for £91.4m in 1999, in a deal valuing Bmi at £457m. It raised its holding to just under 30pc.
At the time of the 1999 deal, Lufthansa signed a shareholder agreement with Bmi chairman Sir Michael Bishop, 63, who controls 50pc of the airline plus one share. Scandinavian carrier SAS owns the other 20pc. The agreement, thought to run for about 10 years, gives Sir Michael a "put" option, enabling him to sell his controlling stake to Lufthansa for about the same price as it paid for its shares in 1999. This would value the holding controlled by Sir Michael at £229m.
It is understood that 2005 is the first year when Sir Michael can exercise this option. He can exercise it later, though the price is said not to be "materially different", should he wait. Yesterday, Sir Michael would only say: "I have never discussed the shareholder agreement and I don't intend to now." Asked if he had any plans to sell Bmi, he said: "You are asking questions I have no intention of answering."
Alongside the shareholder agreement, Bmi, Lufthansa and SAS also signed an operating joint-venture for routes between the UK, Germany and Scandinavia. Revenues and costs are pooled, with Lufthansa taking the biggest share of profits and losses. This agreement has proved expensive for Lufthansa, whose new chairman and chief executive, Wolfgang Mayrhuber, wants to offload the Bmi stake.
Last year, Lufthansa reported €76m (£53m) losses from its interest in Bmi, including a €66m goodwill write-off, up from €66m losses the previous year when Lufthansa wrote down €53m. Lufthansa hopes a putative deal to sell its stake and possibly SAS's would trigger a take?over of Bmi, enabling it to get out of the shareholder agreement.
Virgin, which held abortive merger talks with Bmi in May 2003, and BA are the logical buyers. Bmi has 14pc of Heathrow take-off and landing slots and a short-haul network. BA, with 40pc of the slots, would face competition issues buying Bmi.
For years, Sir Michael has waited for an "open skies" pact between Europe and America, which would increase the value of Bmi's Heathrow slots but such a politically sensistive deal may still be years away.
A Virgin spokesman said: "We have always said we think there is a deal to be done between ourselves and British Midland."
A BA spokesman said: ``We receive many approaches each year from potential sellers but have a long-standing policy of not commenting on speculation about possible investments."
Asked if it was trying to sell its Bmi stake, a Lufthansa spokesman said: "It's pure speculation. We have no comment to make."
Lufthansa to sell BMI stake.
Doesn't ' it's pure speculation. We have no comment to make ' normally mean 'yes' in such situations?
The figures as quoted would certainly make miserable reading to the beancounters @ LH.
The figures as quoted would certainly make miserable reading to the beancounters @ LH.
Join Date: Aug 1999
Location: Dublin, Ireland
Posts: 1,879
Likes: 0
Received 0 Likes
on
0 Posts
I can't see any point in BA buying them; the competition rules would probably require them to get rid of any slots they would acquire (which would presumably be the main objective for BA); also concerns re competition on domestic routes.
If, on the other hand, RB were to buy LH's share, what could MB do about it? Probably nothing. It appears from Virgin's comments that it would like to buy BD, but MB is the obstacle. If they had that 30% shareholding, it would be a message to him: "sell now and get the benefit; wait and we'll just buy your share after you're gone; we can wait ... "
If, on the other hand, RB were to buy LH's share, what could MB do about it? Probably nothing. It appears from Virgin's comments that it would like to buy BD, but MB is the obstacle. If they had that 30% shareholding, it would be a message to him: "sell now and get the benefit; wait and we'll just buy your share after you're gone; we can wait ... "
V sad
Lady Lexxington
Join Date: Jul 2004
Location: The Manor House
Age: 43
Posts: 1,145
Likes: 0
Received 0 Likes
on
0 Posts
Oh god, here we go again..... shall we just re-name this thread now? 
Will we be on red or on the dole queue. Anbody who doesn't think RB will buy the stake is dreaming. It's what he's been wating for I'm sure.
Will we be on red or on the dole queue. Anbody who doesn't think RB will buy the stake is dreaming. It's what he's been wating for I'm sure.
Join Date: Apr 2002
Location: UK
Posts: 134
Likes: 0
Received 0 Likes
on
0 Posts
If I understand this article correctly, Lufthansa would have to buy Bish's stake for £229m (or so), before then offering its total holding to the market. As the airline's market value is probably considerably less than that, the benefit for Lufthansa looks, erm, limited! Alternatively, LF could sell its 30% stake for pennies, but Sir Mike would still control the airline, so where's the incentive for a buyer?
If VS could justify the investment to buy out Lufty's plus SMB's stakes, would they be able to utilise the slots owned by BD, or would they be made to give many of them up? I can't see VS wanting to continue to run the loss-making full-service side of the airline in the face of increasing loco competition, and I assume that Baby, with its own AOC, would be easily floated off (probably before any sale to VS), so what would be left - and how would it fit in with Virgin's premium long-haul market? I don't see any real benefit for VS in owning the rump of a short-haul airline - and it already owns a European loco.
I can't help feeling that a takeover by VS would only be an exercise in acquiring the slots owned by BMI and, if the regulators were to make that ambition difficult, VS would walk away from the deal and then bid on the open market for the slots as BMI gradually sells them off whilst trying to stay alive. Whatever, I can't see any good for BMI out of the deal.
If VS could justify the investment to buy out Lufty's plus SMB's stakes, would they be able to utilise the slots owned by BD, or would they be made to give many of them up? I can't see VS wanting to continue to run the loss-making full-service side of the airline in the face of increasing loco competition, and I assume that Baby, with its own AOC, would be easily floated off (probably before any sale to VS), so what would be left - and how would it fit in with Virgin's premium long-haul market? I don't see any real benefit for VS in owning the rump of a short-haul airline - and it already owns a European loco.
I can't help feeling that a takeover by VS would only be an exercise in acquiring the slots owned by BMI and, if the regulators were to make that ambition difficult, VS would walk away from the deal and then bid on the open market for the slots as BMI gradually sells them off whilst trying to stay alive. Whatever, I can't see any good for BMI out of the deal.
Join Date: Oct 2000
Location: London, UK
Posts: 329
Likes: 0
Received 0 Likes
on
0 Posts
You'll notice, of course, that the Telegraph has managed to concoct this story without mentioning a single source.
Which makes the story nothing more than "this will happen because the Telegraph says so".
Amateur journalism.
Which makes the story nothing more than "this will happen because the Telegraph says so".
Amateur journalism.
If LH want to sell their share I would have thought the most likely buyer is Sir M. himself. I suspect he has a first refusal clause written into the contract anyway and would no doubt be able to but it back for less than he sold it. I don't think he ready to give up his train set yet.
Join Date: Feb 2001
Location: gate 67 JFK
Posts: 690
Likes: 0
Received 0 Likes
on
0 Posts
Max Angle
I think you have hit the nail on the head, Bish is no fool and would have no problem in finding the cash. It is SAS & Luffty that holds back bmi growth (and baby and regional) and some of his half witted managers as well........
As Bush once said " bring it on...."
Cheers
Burt
As Bush once said " bring it on...."
Cheers
Burt
Lufthansa to sell BMI stake
Konkordski
I hear what you say about the story not having a source, but in my experience, these ideas are often 'floated' over an expensive lunch with the organ concerned, and put into print to see what the reaction is amongst investors, the City etc. The current government does it all the time!
I hear what you say about the story not having a source, but in my experience, these ideas are often 'floated' over an expensive lunch with the organ concerned, and put into print to see what the reaction is amongst investors, the City etc. The current government does it all the time!
Join Date: Aug 2002
Location: England.
Posts: 440
Likes: 0
Received 0 Likes
on
0 Posts
It is SAS & Luffty that holds back bmi growth (and baby and regional) and some of his half witted managers as well........
Are LH and SAS blocking the longhaul bids from LHR?
How exactly are they holding back growth?
Where would that growth be?
The second part I agree with. bmi survives despite management incompetence on an epic scale, from the top to the bottom at Toad Hall. Heathrow slots have been the only thing preventing the whole sorry mess from sinking into oblivion since the early eighties. Now that the lo-cost carriers are neutralising LHR shorthaul profitability, we're seeing the true colours of bmi.......a loss making shambles.
Join Date: Jan 2002
Location: Wherever my current employers wish to send me !!
Posts: 718
Likes: 0
Received 0 Likes
on
0 Posts
Yawwwwwwwwwwwwwn....
I had promised myself that I wouldn't take the bait and reply to any of your bitter and twisted rants.....but it would be shame to let you down.
More anti-company crap from a man who should have been
pensioned off years ago.
Oh, sorry, I forgot, I'm one of those niave and biased posters that you so despise.
Maybe it's about time that you changed yr user name, again, if you get my drift.
I had promised myself that I wouldn't take the bait and reply to any of your bitter and twisted rants.....but it would be shame to let you down.
More anti-company crap from a man who should have been
pensioned off years ago.
Oh, sorry, I forgot, I'm one of those niave and biased posters that you so despise.
Maybe it's about time that you changed yr user name, again, if you get my drift.
Last edited by Little Blue; 27th Jan 2005 at 07:32.
Join Date: Jan 2002
Location: UK
Posts: 35
Likes: 0
Received 0 Likes
on
0 Posts
I agree Little Blue - However this WHOLE thread is just ONE BIG yawn. It is like how many times can we speculate on speculation. Just do a search on bmi and Virgin and you can have the pleasure of reading some of the greatest drivel ever posted on these forums!
Join Date: Oct 2004
Location: Denmark
Posts: 37
Likes: 0
Received 0 Likes
on
0 Posts
Yaaaawn - maybe ?
Scandinavian Airlines are getting in on the act as well.
link
Well, no smoke without fire 
I wonder if R.B. has pyromantic tendencies
link
SAS could pocket billions on sale of British airline company
The Scandinavian airliner SAS is on the verge of raking in billions of Danish Kroner, provided that the sale of the British airline company BMI -- formerly known as British Midland -- falls into place. SAS owns 20 percent of BMI and, like the German airliner Lufthansa, is ready to sell its block of shares. "As long as we can get a good price, we are absolutely willing to sell," says Sture Stølen, head of international relations at SAS. Analysts and British media both say that a sale is looming. Virgin is very interested in buying.
The Scandinavian airliner SAS is on the verge of raking in billions of Danish Kroner, provided that the sale of the British airline company BMI -- formerly known as British Midland -- falls into place. SAS owns 20 percent of BMI and, like the German airliner Lufthansa, is ready to sell its block of shares. "As long as we can get a good price, we are absolutely willing to sell," says Sture Stølen, head of international relations at SAS. Analysts and British media both say that a sale is looming. Virgin is very interested in buying.
I wonder if R.B. has pyromantic tendencies
Join Date: Nov 2004
Location: out of a suitcase
Posts: 53
Likes: 0
Received 0 Likes
on
0 Posts
vitriolic nonsense
it amazes me how much energy one sad individual can expend on a personal crusade to nowhere. No one would(I hope!) be glad to see their colleagues out of work and anyone with any integrity would not wish to see any company fail in our industry, bmi will survive because, despite the childish rantings of a very few bitter and twisted posters (you know who you are!!), there are many bmi employees including managers who are extremely competent, professional and most importantly wish to see bmi survive, succeed and build on the achievements of the past 40 years or so I would be interested to know what your attitude to bmi would be if you had not been canned!! GET OVER IT!!
Join Date: Apr 2002
Location: UK
Posts: 134
Likes: 0
Received 0 Likes
on
0 Posts
Notwithstanding the protestations by some here, who are presumably BMI employees unhappy with the possibility of there being a flash sale of the company, there does seem to be more than a hint of smoke in these stories. Attributable individuals from both Lufthansa and SAS are saying openly that they'd like to sell their respective stakes in BMI, and the Telegraph appears to have some detail of the contractural arrangements between Sir Michael and Lufthansa. So it seems likely that something is afoot!
Yet I still don't see the benefit to Virgin in taking on BMI as a going concern - at least as it stands now. So I refer back to my earlier post:
Have I got it wrong? Is this all likely to end in sweetness, light and world domination for BMI? Or are we seeing the beginning of the end of BMI as a - relatively - independent operator, destined to become to Virgin what Caledonian was to BA?
Yet I still don't see the benefit to Virgin in taking on BMI as a going concern - at least as it stands now. So I refer back to my earlier post:
If I understand this article correctly, Lufthansa would have to buy Bish's stake for £229m (or so), before then offering its total holding to the market. As the airline's market value is probably considerably less than that, the benefit for Lufthansa looks, erm, limited! Alternatively, LF could sell its 30% stake for pennies, but Sir Mike would still control the airline, so where's the incentive for a buyer?
If VS could justify the investment to buy out Lufty's plus SMB's stakes, would they be able to utilise the slots owned by BD, or would they be made to give many of them up? I can't see VS wanting to continue to run the loss-making full-service side of the airline in the face of increasing loco competition, and I assume that Baby, with its own AOC, would be easily floated off (probably before any sale to VS), so what would be left - and how would it fit in with Virgin's premium long-haul market? I don't see any real benefit for VS in owning the rump of a short-haul airline - and it already owns a European loco.
I can't help feeling that a takeover by VS would only be an exercise in acquiring the slots owned by BMI and, if the regulators were to make that ambition difficult, VS would walk away from the deal and then bid on the open market for the slots as BMI gradually sells them off whilst trying to stay alive. Whatever, I can't see any good for BMI out of the deal.
If VS could justify the investment to buy out Lufty's plus SMB's stakes, would they be able to utilise the slots owned by BD, or would they be made to give many of them up? I can't see VS wanting to continue to run the loss-making full-service side of the airline in the face of increasing loco competition, and I assume that Baby, with its own AOC, would be easily floated off (probably before any sale to VS), so what would be left - and how would it fit in with Virgin's premium long-haul market? I don't see any real benefit for VS in owning the rump of a short-haul airline - and it already owns a European loco.
I can't help feeling that a takeover by VS would only be an exercise in acquiring the slots owned by BMI and, if the regulators were to make that ambition difficult, VS would walk away from the deal and then bid on the open market for the slots as BMI gradually sells them off whilst trying to stay alive. Whatever, I can't see any good for BMI out of the deal.
Join Date: Feb 2001
Location: gate 67 JFK
Posts: 690
Likes: 0
Received 0 Likes
on
0 Posts
SAS & Luffty holding has been a mixed blessing, but right now it acts as a brake on all of the groups activities
Baby is capped at 16 aircraft and does not operate any flights to German or Scandic destinations
Regional would love to do Munich out of Leeds and EDI and has the slots, but is blocked by Luffty likewise SAS blocked CPH out of LBA.
The revenue and costs share on LHR routes to Germany and Scandic countries was a good deal (when you could get away with charging £800.00 return for Y class) but Luffty and SAS have far higher cost bases than bmi, in any event the deal that bmi had in terms of support ends this spring, which is why the blue sky project was so important.
I hear that airframe No 4 on the 330 fleet will be the one that was diverted to Emirates post 9/11 and that it will be re fitted with the "the Bussiness" seats in rows 1 to 4, these seats are still in storage in a bmi hangar i am told
This will then do the India routes from LHR
Bish holds the extra share so given that bmi is a private company he can do much as he pleases. he is still youngish for an airline chairman and in good health. There are no hiers to his fortune so i can\'t see any reason why he would wan\'t to get out now. the LHR slots are worth far more than the company and in another 10 years we might see another runway at LHR which would change the picture as would a new open skies deal that (Queen Mandelson ex of Hartlepool) is working on as EU transport minister.
VS would love to merge and are keener to do so than bmi so any deal will have to protect SMB interests and wishes (these might not be the same as the pilots that said!!)
Yes there are problems in bmi, but they have survied with out a penny of state aid, weren\'t given Concorde for free and compared to the dosh that Sebena, Air france & others have had, then they(bmi) have provided a good level of service for joe public and a lot of pilots for very many years, but it is time to move on.
Cheers
Burt
Baby is capped at 16 aircraft and does not operate any flights to German or Scandic destinations
Regional would love to do Munich out of Leeds and EDI and has the slots, but is blocked by Luffty likewise SAS blocked CPH out of LBA.
The revenue and costs share on LHR routes to Germany and Scandic countries was a good deal (when you could get away with charging £800.00 return for Y class) but Luffty and SAS have far higher cost bases than bmi, in any event the deal that bmi had in terms of support ends this spring, which is why the blue sky project was so important.
I hear that airframe No 4 on the 330 fleet will be the one that was diverted to Emirates post 9/11 and that it will be re fitted with the "the Bussiness" seats in rows 1 to 4, these seats are still in storage in a bmi hangar i am told
This will then do the India routes from LHR
Bish holds the extra share so given that bmi is a private company he can do much as he pleases. he is still youngish for an airline chairman and in good health. There are no hiers to his fortune so i can\'t see any reason why he would wan\'t to get out now. the LHR slots are worth far more than the company and in another 10 years we might see another runway at LHR which would change the picture as would a new open skies deal that (Queen Mandelson ex of Hartlepool) is working on as EU transport minister.
VS would love to merge and are keener to do so than bmi so any deal will have to protect SMB interests and wishes (these might not be the same as the pilots that said!!)
Yes there are problems in bmi, but they have survied with out a penny of state aid, weren\'t given Concorde for free and compared to the dosh that Sebena, Air france & others have had, then they(bmi) have provided a good level of service for joe public and a lot of pilots for very many years, but it is time to move on.
Cheers
Burt
Last edited by INKJET; 27th Jan 2005 at 09:40.
Join Date: Apr 2002
Location: UK
Posts: 134
Likes: 0
Received 0 Likes
on
0 Posts
Bish holds the extra share so given that bmi is a private company he can do much as he pleases. he is still youngish for an airline chairman and in good health. There are no hiers to his fortune so i can't see any reason why he would wan't to get out now.