Lufthansa wants to buy Swiss International Air Lines, the two carriers said on Sunday, confirming months of increasingly heated takeover speculation.
The two airlines, which walked away from a possible tie-up two years ago, said Lufthansa was now prepared to make small Swiss shareholders -- holding about 14 percent of the capital -- an offer "based on the average share price of the recent weeks."
That would translate into some EUR50 million to EUR60 million (USD$67.17 million - USD$80.60 million) at the current share price, a source close to the negotiations said. Swiss' volatile shares had surged nearly 20 percent on Friday amid frantic takeover talk.
The airline's major shareholders, which include the Swiss government with about 20 percent and the country's top banks, UBS and Credit Suisse with about 10 percent each, would only receive a symbolic consideration for their stakes, the source said.
In return, Lufthansa had dropped original demands that major shareholders infuse fresh cash into the Swiss carrier before any takeover by Lufthansa.
But Lufthansa still requires Swiss to implement controversial cost cuts that could mean the loss of 800-1,000 jobs with the aim to save some CHF300 million Swiss francs (USD$260.2 million) in costs. A pilots' union has already threatened to go on strike over those plans.
The airlines said they had worked together on the business model for the integration of the companies, which had yet to be signed off by Swiss's main shareholders or Lufthansa's supervisory board.
"The jointly developed business model aims at providing a concentration of the strengths of both airlines, while retaining the independence of Swiss to the extent possible," Swiss said in a statement.
Lufthansa also said Swiss would continue to fly independently under its own brand as well as keeping its hub at Zurich Airport.
Switzerland's NZZ am Sonntag newspaper said on Sunday that major Swiss shareholders had been invited to a Zurich lawyer's office on Monday to gauge their willingness to sell a majority of the carrier to Lufthansa. Swiss declined to comment on the report, as did UBS and Credit Suisse.
But UBS signaled it would be open to discuss possible offers. "If Swiss were to put options on the table then we would look at them," a spokeswoman said.
Leading shareholders agreed last August to extend by another year a pact to hold on to their stakes in the flag carrier.
Despite hefty job, fleet and route cuts over the past years, Swiss has struggled with a small domestic market in a European industry dominated by a number of larger airlines and fast-growing low-cost carriers. It has yet to make an annual profit since it was formed out of regional carrier Crossair and the remains of collapsed predecessor Swissair in late 2001.
Industry experts have said a takeover of Swiss makes strategic sense as it will provide Lufthansa with lucrative business traffic and another hub at Zurich.
Lufthansa and Swiss were linked before when Swiss came close to joining the Star Alliance alongside Lufthansa before backing away in 2003. Swiss subsequently failed to join the oneworld grouping led by British Airways last year.
