Bankinter | IAG will grant Globalia a 100 million euros loan. At some point in the future, it could convert that into an up to 20% stake in Air Europa. This loan will give Iberia exclusivity in negotiations.
Analyst team’s opinion: Neutral impact. On the one hand, this provides Iberia with more time to reach an agreement and block the entry of a third party. In practice, it implies putting a shield in place for three years. During the first year it has exclusivity in the negotiation and in the two following years it could equal any offer made by third parties. Whatsmore, IAG has a high volume of liquidity (11.986 billion euros) and this amount does not imply any relevant deterioration in its balance sheet. That said, one of the objectives of the deal, and the reason why the previous agreement was cancelled, was a reduction in the price (500 million euros agreed on in January 2021) and for the time being they have not made any progress in this respect: the 100 million euros given in the form of a loan could mean up to 20% of the value, which means valuing the company at 500 million. It’s also important to find out will happend with Air Europa’s debt (475 million with SEPI and 141 million with ICO). In any event, it is clear that both parties have an interest in the transaction going ahead. We recall that Iberia paid 75 million euros (40 million for the clause agreed on in 2019 and 35 million to avoid any litigation related to the deal) when the previous negotations were cancelled. And it will be discounted from the purchase price of the transaction if it finally happens. The Government has also shown interest in Air Europa being bought by Iberia to create an intercontinental hub. We reiterate our “tactical” stance and, due to the conflict bewteen Russia and the Ukraine, recommend not take positions in the sector for the time being.
