Skift Take

There we have it: Norwegian's CEO doesn't want to do a deal with IAG. That's not necessarily the end of the story, however. These things can change pretty quickly.

Norwegian Air Shuttle ASA Chief Executive Officer and co-founder Bjorn Kjos said the discount carrier being pursued by rival IAG SA isn’t for sale, reiterating a stance long held by the former fighter pilot who has a 27 percent stake.

“I haven’t thought about selling at all” even though many companies have shown interest in acquiring Norwegian Air, Kjos told reporters in Oslo Friday. Having just returned from a trip, he said he hasn’t spoken with IAG since the British Airways owner revealed Thursday it had acquired a 4.6 percent holding and is considering making a full offer.

IAG’s move on Norwegian comes after the company took steps to shore up its stretched balance sheet in a bid to pursue expansion into low-cost intercontinental flights. The push abroad has shaken up competition in Europe and also helped push the Nordic airline into its first annual loss since 2014 amid staff shortages and engine snags. Yet Kjos has said in an interview a sale “has not been on our agenda at all.”

An acquisition could value the company at about $3 billion including debt, people with knowledge of the matter have said, asking not to be identified because the deliberations are confidential. A deal with IAG would accelerate a rapidly consolidating European airline market.

“I haven’t thought about anything with IAG,” Kjos said Friday at the press conference, adding that its pursuit doesn’t come as a surprise. Norwegian has had visits of all airlines with money to spend and an interest in buying into the carrier, he said.

Shares Jump

Norwegian Air shares jumped as much as 13 percent on Friday after rising 47 percent the day before. The stock was nearly unchanged at 265.50 kroner at 3:07 p.m. in Oslo, giving a market value of 10.1 billion kroner ($1.3 billion).

“The share price doesn’t reflect the underlying value and things we do in the company,” the CEO said. “Norwegian has fantastic potential. I think it has been too cheap.”

IAG has a number of options, according to Bernstein analyst Daniel Roeska. These include a full-scale acquisition, or increasing its stake to just under 30 percent without making an offer, and having a board seat to influence strategy.

IAG could also “wait for Norwegian to go bankrupt, if this is indeed going to occur,” then pick up pieces of the company, the analyst said. “We would not expect this episode of European consolidation to materialize quickly.”

Studying Debt

IAG will need time to figure out how much debt Norwegian has, and how much it would have to acquire, he noted, estimating the level at about 5.5 billion euros ($6.8 billion) including leased aircraft.

Including capitalized aircraft leases, the company’s enterprise value, which includes equity, may be about 7 billion euros, according to Goodbody analysts Mark Simpson and Nuala McMahon. While financing that would be manageable given IAG’s size, Norwegian’s low profitability may be a bigger obstacle to a full takeover.

“Restructuring of the business, renegotiating its lease terms, and integrating Norwegian’s base operations, especially at Gatwick, Madrid and Barcelona, would be critical,” the analysts wrote. Given the high leverage of Norwegian and its equity being mostly in aircraft, “the deal really is in the hands of the lessors and bankers.”


©2018 Bloomberg L.P.

This article was written by Jonas Cho Walsgard and Richard Weiss from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to

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Tags: british airways, iag, long-haul, low-cost, low-cost carriers, norwegian

Photo Credit: Bjorn Kjos, Norwegian CEO, does not want to sell the airline. IAG has built up a 4.61 percent stake in the carrier. Bloomberg