IAG buys stake in Norwegian as first move in takeover talks

IAG, holding that brings toger Iberia, British Airways and Level, has announced this Thursday that studies launch a takeover bid on Norwegian Air Shuttle ASA (Norwegian), which has already acquired a share of 4.61%, as announced today group to National Commission of Stock Market (CNMV).

IAG (International Airlines Group) revealed it has acquired a 4.61% stake in the airline "to establish a position from which to initiate discussions, including the possibility of a full offer for Norwegian".

Shares in the struggling budget airline jumped 37pc following initial reports of IAG's approach, with the company now valued at $1.22bn (€1bn).

However, Norwegian said it had no prior knowledge of the minority acquisition by IAG.

"Norwegian believes that IAG's interest in the company confirms the sustainability and potential of our business model and global growth", it said.

Norwegian Air Shuttle has rocked the long-haul market with offers like US$140 tickets from Edinburgh to NY.

Norwegian carries almost 6 million United Kingdom passengers annually from airports in London, Edinburgh and Manchester, England, to 50 destinations worldwide, and has been bolstering its long-haul flights to the USA since it introduced them in 2014.

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IAG, formed by the merger of Iberia and British Airways, has used acquisitions to grow in the past, adding Aer Lingus and Spain-based low cost carrier Vueling to its portfolio in 2015. In the long haul low-priced segment, both NAS and LEVEL started recently and the combination of both carriers and its short-haul counterparts could generate an interesting offering of connections for intercontinental travelers.

EasyJet was up 2%, Ryanair up 1.7% Wizz Air 3% after IAG confirmed its position with Norwegian, however.

This year, Norwegian wants to boost its offer by 40 percent.

IAG said in a statement it considered Norwegian to be an "attractive investment".

The purchase of Norwegian would benefit IAG's British Airways gain a bigger share of the low-priced market.

Even after Thursday's rally, Norwegian's founder and top owner, CEO Kjos who controls a quarter of the company's shares, is expected to demand a significantly higher price before selling, said Korsvold.

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