British Airways PLC and Spain's Iberia Lineas Aereas de Espana SA moved closer to a $7.5 billion merger after signing a definitive agreement on the terms of the combination, contingent on BA reaching a “satisfactory” agreement to reduce a £3.7 billion ($5.6 billion) pension deficit.
The merger, subject to approval from European regulators and the companies' shareholders, will probably be completed in “late 2010,” London-based BA said today in a statement.
If an agreement on reducing the pension deficit can't be reached, Madrid-based Iberia can still pull out of the agreement. Labor unions and BA agreed on March 16 to help reduce the pension deficit through contribution and benefit concessions. Fund trustees must approve that accord by June 30.
The two airlines will maintain their respective brands and operations under a holding company called International Consolidated Airlines Group SA, which will seek listings in the U.K. and Spain, the carriers said. Iberia investors will get 1.0205 shares in the company for each one currently held, while BA stockholders will be awarded shares on a one-for-one basis.
The European Commission expects BA and Iberia to seek regulatory clearance for their merger “in due time,” spokeswoman Amelia Torres said.