Frankfurt After months of evaluation, Lufthansa management has decided to part with part of the technology and maintenance subsidiary Lufthansa Technik (LHT). This emerges from the speech by Lufthansa boss Carsten Spohr at the annual general meeting this Tuesday.
“We are convinced that greater independence from the group will be good for the further development of Lufthansa Technik,” said Spohr in the previously published speech: “That is why we are making preparations for the sale of a minority stake in the coming year.” A spokesman for the The company referred to Spohr’s speech, but did not want to give any further details.
Spohr’s team has long considered parting with part of the technology subsidiary. The first ideas for this already existed before the pandemic. The background: Lufthansa wants to focus more on its core business of transporting people and goods. At the same time, management hopes to better demonstrate the value of the entire group.
With a good 20,000 employees, Lufthansa Technik achieved sales of four billion euros and an adjusted operating result (Ebitda) of 384 million euros last year. The engine and maintenance specialist MTU Aero Engines is traded on the stock exchange at 19 times its operating profit, totaling almost ten billion euros and thus higher than the entire Lufthansa Group (a good eight billion euros).
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LHT could be valued at more than five billion euros in a partial sale, with some even expecting a valuation of seven to eight billion euros, including debt, financial sources said. Citi and JP Morgan are advising Lufthansa on the transaction.
According to bankers and company insiders, Lufthansa only wants to approach financial investors as potential buyers. You could support the management of LHT in aligning the Lufthansa subsidiary even more optimally than before. In a few years, investors could then bring their package to the stock exchange. The sticking point in the talks with private equity investors is likely to be the say that Lufthansa would grant to the investors.
Not only consent to the partial sale in the group
Whether it comes to that depends crucially on the offers. Management still has the option to stop the partial sale in the coming year if the achievable price is too low or the market environment is not right, according to the company. “For us, a strict and simple rule applies: Every transaction must create value,” says CEO Spohr’s speech at the Annual General Meeting.
Not everyone in the Lufthansa Group welcomes a partial sale of Lufthansa Technik. On the one hand, the subsidiary is closely linked to the core business. The maintenance licenses for Airbus and Boeing jets depend, among other things, on the fact that the group uses these aircraft itself. In addition, LHT is considered one of the company’s hotbeds. Former Lufthansa CEOs such as Wolfgang Mayrhuber and Jürgen Weber began their careers at the subsidiary in Hamburg.
The knowledge of Lufthansa Technik also plays an important role when it comes to making flying sustainable. Ideas such as a special and fuel-saving coating of the wings – the so-called shark skin – were developed by the engineers at Lufthansa Technik together with experts from BASF. At the same time, the offshoot helps with its proceeds to cushion the volatile core business. On the other hand, the management can use the sales proceeds to reduce the debt burden. During the crisis, Lufthansa accumulated credit debts amounting to 16.7 billion euros.
With the fundamental decision regarding Lufthansa Technik, Spohr and his team want to show investors that they are serious about their sales ideas. Actually, a decision about the technology subsidiary should be made by the end of last year. After the group finally repaid the German state aid faster than expected, the pressure to sell eased somewhat. Now the plans are gaining momentum again.
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This also applies to the planned sale of the business travel service provider Airplus. That had been put on hold in the meantime, but talks have now resumed. “We have started a process to find a buyer for our Airplus credit card business,” Spohr said in his speech.
Airplus could be valued at around €1 billion if sold, people familiar with the transaction said. The credit card companies American Express and Mastercard as well as associated companies are named as possible bidders. Bankers report that it is not yet clear how long the sale process led by Goldman Sachs will take. Business travel bookings are on the rise again. The assumptions on the recovery of demand compared to the pre-pandemic level will have a significant impact on the valuation.
More: At Lufthansa, the black numbers are getting closer