Lufthansa agree compromise deal to buy BMI
23.06.09
Lufthansa has agreed a compromise deal to buy BMI, the second biggest airline at Heathrow by slots. It will pay Sir Michael Bishop £175m as part of the settlement of their dispute about the sale of his stake in BMI. Sir Michael, chairman of BMI, will also receive a further £48m for the sale of his 50% plus one share holding in the airline.
The two sides reached an out of court settlement in the dispute over Lufthansa's option to buy Sir Michael's stake. The option was part of a deal it signed with Sir Michael and SAS in 1999. Sir Michael exercised his option to sell last October - reportedly for about £300m - but the German airline said that certain conditions had not been met and threatened to ‘walk away.’ In response Sir Michael went to the High Court in London.
Under the settlement Sir Michael will receive £175m from Lufthansa, which will not now be required to buy his stake. However, Lufthansa has set up a new company in London called LHBD which will pay £48m for Sir Michael's share of bmi. Lufthansa has a 35% stake in this company but expects to acquire 100% of it after obtaining the necessary clearance.
Lufthansa said that the purchase of BMI had given its access to the 11% of slots it owns at Heathrow. It said BMI had in recent years ‘experienced increasing financial challenges’ which had been made worse by the sharp rise in fuel prices and the economic crisis.
Sir Michael said: ‘I am pleased that we have settled this dispute. Our agreement resolves the uncertainty over the ownership of BMI, which should be of considerable benefit to the company and its 4,500 employees.’
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