Deutsche Lufthansa AG (LHA)’s sale of its BMI Regional unit is faltering as the buyer is struggling to raise money for the purchase, according to an e-mail sent to staff by BMI’s chief executive officer.
Lufthansa said Jan. 20 that a deal to sell BMI Regional to an unidentified buyer had been concluded subject to “certain pre-conditions.”
“It was hoped that the sale would have been completed by now but as funding requirements have not been met by the potential buyer, the process has been delayed,” according to the e-mail sent to staff yesterday by BMI CEO Wolfgang Prock- Schauer and seen by Bloomberg News.
The sale of BMI Regional is part of Cologne-based Lufthansa’s effort to divest money-losing British Midland Airways Ltd., known as BMI. International Consolidated Airlines Group SA (IAG), the parent of British Airways, agreed in December to buy BMI for 172.5 million pounds ($273.3 million).
BMI, based at East Midlands Airport in Derby, England, operates three units: BMI, which flies to destinations in the U.K., Europe, the Commonwealth of Independent States, the Middle East and Africa; BMI Regional, a short-haul carrier in the U.K. and Europe; and BMIbaby, a low-cost airline.
As part of the deal, Lufthansa has the option to sell both BMI Regional and its discount carrier BMIbaby, with IAG receiving a “significant price reduction” if BMI fails to dispose of BMIbaby before the deal is completed.
The carrier is in advanced discussions with one of two potential bidders for BMIbaby, according to Prock-Schauer’s e- mail. Lufthansa hasn’t disclosed the names of any of the potential buyers of BMI Regional or BMIbaby.
The sale of BMI to IAG has yet to be approved by European Union regulators, though both airlines said March 15 that they are confident that the deal will receive regulatory clearance and are targeting closing the sale by the end of this month. The European Commission on March 12 extended a deadline to rule on the deal to March 30.
“Regarding BMI Regional we have concluded an agreement with a U.K.-based investor group which is subject to certain pre-conditions which are to be fulfilled,” BMI said in an e- mailed statement today in response to a request for comment.
Andreas Bartels, a Lufthansa spokesman, declined to comment.
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