Lufthansa looking to merge European catering unit with peer - sources (updated)
27/03/2019 11:34
(Adds details)
By Arno Schuetze
FRANKFURT, March 27 (Reuters) - Lufthansa LHAG.DE is
looking to merge the European operations of its catering unit
LSG with a peer as it struggles with low margins in a
competitive market on the continent, people close to the matter
said.
Lufthansa has provided information to potential bidders and
has asked them to make offers for the business in early April,
the people said, adding that Lufthansa was not interested in a
deal with private equity.
Austria's Do&Co DOCO.VI and Switzerland's Gategroup are
expected to make offers for the European LSG operations, the
people said, adding that given its low profitability and low
expected value even medium-sized Do&Co could do a deal without a
partner.
Lufthansa reiterated that it was considering options for
LSG, while Gategroup declined to comment and Do&Co was not
immediately available for comment.
While Lufthansa is currently focused on finding a solution
for its European operations, a deal for its international
business could follow at a later stage, the people said.
The catering business is challenged by a large number of
locations it serves, high staff costs and exposure to currency
exchange rates, Lufthansa's Chief Executive Carsten Spohr said
recently.
Lufthansa's LSG group saw adjusted earnings before interest,
tax, depreciation and amortization rise 39 percent to 181
million euros last year on flat revenues of 3.2 billion euros.
It employs 35,500 staff.
The bulk of profits came from the international business,
the sources said. Lufthansa does not provide a regional split of
the figures. The figures were helped by lower restructuring
costs.
Do&Co, backed by gastronomy entrepreneur Attila Dogudan, has
a market capitalisation of 735 million euros. It serves
customers at 60 airlines including Lufthansa’s Austrian unit and
its core catering business posted 61 million in 2018 EBITDA on
sales of 574 million.
Gategroup is owned by Chinese conglomerate HNA, whose
current financial strains may dissuade the company from doing a
major cash deal, people familiar with the matter have said in
the past.
After a failed 2018 listing of Gategroup, 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
Morgan Stanley MS.N is helping Lufthansa in finding a
buyer for parts or all of LSG, sources told Reuters in
2018. urn:newsml:reuters.com:*:nL8N1YJ394
($1 = 0.8857 euros)
(Reporting by Arno Schuetze
Additional reporting by Ilona Wissenbach
Editing by Tassilo Hummel/Keith Weir)
((arno.schuetze@thomsonreuters.com; +49.69.7565.1197; Reuters
Messaging: arno.schuetze.reuters.com@reuters.net))