Lufthansa in early talks on possible tie-up for caterer LSG -sources (updated)
14/12/2018 13:06
* Do&Co, Gategroup, SATS possible partners
* Deal could be worth 1 billion euros
* CEO has said divesting LSG possible
(Adds detail, background)
By Arno Schuetze, Anshuman Daga and Kirsti Knolle
FRANKFURT, Dec 14 (Reuters) - Lufthansa LHAG.DE is in
early talks about a possible tie-up between its LSG Group
catering unit with partners such as Austria's Do&Co DOCO.VI ,
Singapore's SATS SATS.SI and Switzerland's Gategroup, people
close to the matter said.
Lufthansa is exploring its options with the help of Morgan
Stanley MS.N , but has not launched a formal sales process,
sources told Reuters.
Chief Executive Carsten Spohr told a newspaper last month
that the German airline was considering divesting LSG.
urn:newsml:reuters.com:*:nL8N1XR196
"We have not defined whether this (sale) would go ahead, or
whether we would hold on to LSG in full," he told the
Boersen-Zeitung newspaper, adding the company would not support
a sale to private equity.
A Lufthansa spokesman said the airline had no additional
comment. SATS, Do&Co, Gategroup owner HNA and Morgan Stanley
declined to comment.
A deal could value LSG at roughly 1 billion euros ($1.13
billion), people close to the matter said, but noted that
antitrust issues might prevent some players from being able to
buy all of LSG's assets, meaning a partial sale is also
possible.
Vienna-listed Do&Co, which has a market capitalisation of
830 million euros, is too small to do a deal on its own, the
sources said.
Do&Co has therefore reached out to investors who could
potentially help it finance a deal, they said.
Do&Co has been catering for Lufthansa’s Austrian unit
Austrian Airlines since 2007 and for its Swiss unit since
mid-2018. Its other customers include Turkish Airlines and, from
2020, IAG's ICAG.L British Airways and Iberia.
SATS, 41.5 percent owned by Singaporean state fund Temasek,
would likely not face financing issues but a deal of this size
has not figured high on Chief Executive Alex Hungate's agenda, a
person close to the matter said.
The company, spun out of Singapore Airlines in 2009, has
focused on Asia and has not made large acquisitions.
Gategroup, owned by Chinese conglomerate HNA, is also a
possible partner for LSG, the sources said, but added that
current financial strains faced by HNA might dissuade the
company from entering into a large cash deal.
After a failed listing of Gategroup earlier this year,
Temasek and RRJ Capital subscribed to a five-year mandatory
exchangeable bond which upon conversion will account for up to
49 percent of its share capital. urn:newsml:reuters.com:*:nL8N1TY4VT
For the first nine months of the year LSG reported a 50
percent rise in adjusted earnings before interest and tax to 99
million euros.
The business is challenged by a large number of locations it
serves, high staff costs and exposure to currency exchange
rates, Lufthansa's Spohr said recently.
($1 = 0.8857 euros)
(Additional reporting by Anshuman Daga, Jamie Freed and Kirsti
Knolle; editing by Thomas Seythal)
((arno.schuetze@thomsonreuters.com; +49.69.7565.1197; Reuters
Messaging: arno.schuetze.reuters.com@reuters.net))