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FRANKFURT—Lufthansa’s planned takeover of ITA Airways has hit a last-minute snag as a dispute over the final purchase price delayed a crucial regulatory step in the acquisition process.
ITA Airways, Lufthansa, the Italian Ministry of the Economy and Finance (MEF), easyJet, Air France-KLM and International Airlines Group (IAG) were all due to sign the negotiated remedy package to be submitted to the European Commission (EC) on Nov. 4.
However, the MEF refused to do so at the very last minute. Officials allegedly said that they are not willing to sell ITA to Lufthansa under its value.
MEF and Lufthansa agreed on the terms of the sale in 2023. As part of the deal, Lufthansa would pay €325 million ($354 million) for an initial 41% stake upon closing. Then, another €325 million would become due when Lufthansa decided to buy a further 49%. The exact amount is an indemnity clause which adjusts the price according to ITA’s actual financial performance. An amount of €10 million is at stake, according to industry sources. But it is not clear that the actual purchase price for the second tranche will be lower as it depends on performance in future years.
Lufthansa said it is complying with the terms of the purchase agreement.
Lufthansa has been pursuing ITA for several years, including several delays, and has had to agree to a substantial remedy package to get EC approval. Finding new competitors on some European routes from Milan and Rome was one condition, as was ensuring competition on several domestic routes in Italy. Long-haul services to Toronto, Washington DC and San Francisco are also part of the agreement. The parties have worked over the past several months to settle the issue with the EC and align with the remedy-takers.
Lufthansa wants to add ITA to its portfolio of airlines among others to be less dependent on the high-cost, slow-growth German market.
According to industry sources, the two sides now have until Nov. 11 to still find a solution. After that, EC approval would have to start from scratch, at least delaying the process by many months and possibly killing the deal.
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