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Lufthansa to take over Swiss airline in staggered steps

Deutsche Lufthansa announced on Tuesday it had won approval for a staggered takeover of Swiss International Airlines, the successor to the defunct Swissair, setting a floating price for the embattled carrier.

Lufthansa's chief executive, Wolfgang Mayrhuber, and the head of Swiss International Airlines, Christoph Franz, signed an agreement in Zurich to push ahead with the takeover.

The deal could value the 15 percent of free-floating stock at 45 million euros (US$58.8 million). The remainder, held mostly by institutions and the Swiss government, could be worth as much as 265 million euros, depending on how the stock performs in its sector over the next few years, Lufthansa said in a statement. The deal could be worth as much as 310 million euros in all, but Lufthansa gave no per share price.

The acquisition was approved by 83 percent of Swiss International's shareholders, including the Swiss government, which has the largest single stake at 20 percent. The boards of both carriers also approved the deal.

"Lufthansa will further expand its position as an internationally leading network carrier by integrating Swiss," the statement said.

Lufthansa said the deal would save about 160 million euros a year beginning in 2007.

The deal was finalized after fears ebbed that a takeover by Lufthansa could spark a nationalist backlash in Switzerland.

The Swiss government spent about 600 million Swiss francs (US$504.6 million) to reintroduce the airline in 2002 after it had gone bankrupt under its previous name, Swissair.

Since it first outlined its takeover plan last week, Lufthansa has been careful to stress that Swiss would keep its brand name and Zurich's international airport would remain a major passenger hub. Lufthansa said Tuesday that it would keep Zurich's airport on an "equitable" footing with its hubs in Frankfurt and Munich.

Lufthansa also said it would also help Swiss raise its presence on long-haul routes by giving it two intercontinental jets from Lufthansa's fleet.

The deal would bring Swiss, which has yet to make a profit, into the Star Alliance.

The takeover would be carried out in steps to avoid antitrust and traffic rights problems. Lufthansa said it would take an initial 11 percent stake this month in AirTrust, a new company that would hold all of Swiss' shares. In May, Lufthansa will offer to buy the 15 percent of free-floating Swiss shares. Once Lufthansa has antitrust clearance from the EU, it will increase its stake to 49 percent, possibly in the third quarter. By 2007, Lufthansa expects to own Swiss outright following approval from aviation authorities.
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