Norwegian shares fell as much as 12 percent, cutting its market value to about $1.5 billion, after the owner of British Airways, said in an earnings presentation Friday that its approaches had failed to yield a deal.
“These proposals were reviewed in conjunction with financial and legal advisers, and were unanimously rejected on the basis that they undervalued NAS and its prospects,” Norwegian said in a
statement. “The board of NAS remains fully committed to delivering on its stated strategy, for the benefit of all NAS shareholders.”
IAG revealed last month that it had bought a 4.61 percent stake in Norwegian to initiate bid discussions with the Scandinavian discount specialist, which is struggling with a stretched balance sheet. Norwegian initially said it had no interest in a takeover before moderating its stance and appointing advisers to consider approaches.
“IAG confirms that it has had contact with the Norwegian board regarding a possible offer, without reaching an agreement,” the London-based carrier said in an earnings slideshow after posting a first-quarter profit that beat estimates and issuing a bullish outlook for the rest of the year. IAG is now considering its options, it said.
Shares of IAG rose 5.6 percent to 676.40 pence at 9:23 a.m. in London, valuing the group at 13.9 billion pounds ($18.9 billion). Norwegian Air fell 8.9 percent to 274.50 kroner, cutting the market value to 12.2 billion kroner ($1.5 billion).
IAG Chief Executive Officer Willie Walsh, speaking on a conference call, declined to comment on the status of a possible deal.
IAG increased first-quarter operating profit 75 percent to 280 million euros ($335 million), beating the 194 million-euro estimate of analysts, and said its earnings are set to increase for 2018 as a whole.
Like rival network operators, IAG is benefiting from a period of increasing demand, with ticket prices rising even as carriers add capacity. The company said in a statement Friday that passenger unit revenue, a measure of fares, advanced 3.5 percent at constant currencies. The improving market presents a benign background to IAG’s possible bid for Norwegian Air.
Taking out Norwegian would eliminate a competitor that’s shaken up the airline industry with low-cost long-haul flights, giving IAG access to a young fleet with fuel-efficient jets that have opened the way for new routes, albeit at considerable cost to the company.
The CEO was upbeat about IAG’s in-house long-haul discount operation Level, saying it had turned in a “very strong performance,” with trans-Atlantic routes popular in both directions. Irish unit Aer Lingus is also doing well, he said.