Frankfurt The Lufthansa caterer LSG Group gets a new owner. The financial investor Aurelius takes over the subsidiary at an undisclosed price. Both companies announced this on Wednesday. The transaction is expected to be completed in the third quarter of this year. Analysts had recently estimated the value of LSG in a range from 500 million to one billion euros.
“We specialize in spin-offs from corporations,” said Dirk Markus, founding partner of Aurelius, the Handelsblatt. If peripheral areas are up for sale, potential often remains untapped. “We want to give the management of LSG the opportunity to concentrate fully on the business and the strategy.”
LSG is active in three business areas: traditional catering for airlines under the name LSG Sky Chefs, in-flight sales with individualized products – so-called Retail in Motion – and supplying non-aviation customers, for example in retail.
For example, LSG works with Starbucks and the retail chain 7-Eleven. “With our new owner, we want to grow in all three areas. We have already identified some projects together,” said Erdmann Rauer, CEO of LSG.
Even before the pandemic, the Lufthansa management had decided to sell the catering subsidiary. CEO Carsten Spohr wants to convert the Lufthansa Group into an airline group. In the past, Lufthansa had been involved in many areas of aviation. For example, the group offers aircraft maintenance through Lufthansa Technik, while the subsidiary Airplus takes care of business trips and their accounting. LSG, in turn, supplies the aircraft with food and drinks.
In the future, the group will focus more on the transport of people and goods. In addition to LSG, Airplus is therefore also for sale. At Lufthansa Technik, on the other hand, an investor is being sought who will take over up to 20 percent of the shares. The process is currently ongoing.
Lufthansa strategy: sell peripheral areas, buy additional airlines
At the same time, the airline sector is to be strengthened. The takeover of the Italian airline ITA is imminent. Spohr has also already expressed an interest in the Portuguese TAP. The government in Lisbon wants to privatize the airline, which was completely nationalized during the pandemic, again.
In 2019, Lufthansa initially found a buyer for LSG’s European business in the Swiss Gategroup Holding AG. Unlike now, the international LSG should go to an investor with experience in the industry, so that the supply of the aircraft at the European home airports of the Lufthansa Group is guaranteed.
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When the pandemic began, the deal with Gategroup that was announced on December 9, 2019 shook briefly, but was then pulled through and completed in December 2020. 7,750 employees changed companies. A price for this LSG area, which had a turnover of a good 1.1 billion euros in the last year before the pandemic, was never mentioned.
Now the international business is also changing hands. It includes 131 kitchens in Emerging Markets, Asia Pacific and the Americas. According to Lufthansa’s annual report, LSG employed around 20,200 people there at the end of 2022.
The caterer generated sales of 1.96 billion euros in 2022, adjusted earnings before interest and taxes (EBIT) were minus eleven million euros, after an operating profit of 31 million euros a year earlier. Like many companies, LSG is struggling with high energy and material costs. In addition to these figures, there is additional sales of a good one billion euros, which the company achieves in various joint ventures, but which is not consolidated.
The boss of the caterer LSG Sky Chefs wants to grow together with a new owner – also through acquisitions.
(Photo: press photo)
Apparently, the LSG workforce does not have to worry about their jobs because of the takeover, CEO Rauer is looking for new staff: “We have prepared for the rising costs of materials and energy. What worries us more is the labor shortage.”
A good three years ago, the sale of LSG’s European business caused a lot of resentment among the workforce. Many feared for their jobs and cherished possessions of the Lufthansa Group, including pensions. The Verdi services union even threatened a strike by the LSG workforce in 2019, but then canceled it at short notice because the employer had made a new offer.
Rauer now wants to go on a growth course with a global recovery in aviation behind him: “And we are thinking about acquisitions – both in terms of capacities and in terms of food technologies.”
LSG also wants to grow in Europe with the new owner
The manager also looks at Europe. The fact that he will compete with the Gategroup, which took over LSG Europa three years ago, is no obstacle for him: “If we didn’t offer our new owner prospects in Europe, we wouldn’t be a global company.”
He also sees growth opportunities in the “Retail in Motion” area. For example, passengers on board can put together their own menu. Even if he is traveling economy, it is possible to order a wine from business class. This is not yet possible with most airlines. “This business was developed in Europe, in other countries we are only at the beginning. There is still a lot of potential there,” said Rauer.
>> Read also: Lufthansa is preparing a new airline – and is increasing the pressure in collective bargaining
“LSG’s strategy makes sense. In the end, it doesn’t matter to us whether the sandwich is eaten on the plane or somewhere else, as long as it brings sales and growth,” said Markus von Aurelius. The former consultant founded Aurelius in 2006 together with his colleague Gert Purkert. The company is active throughout Europe and holds shares in various companies in Europe. This includes Zim, a German manufacturer of aircraft seats.
“We are a typical private equity investor, our funds have a term of ten to 15 years,” said Markus. A quick resale of LSG is not to be expected: “We are assuming our commitments will last six to eight years. Corporate spin-offs take a certain amount of time,” says Markus.
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