IAG, which owns Aer Lingus and British Airways, abandoned an eight-month pursuit of Norwegian Air Shuttle, leaving the indebted airline reeling as it faces a cash crunch during the slow winter season.
IAG “does not intend” to make a further bid and will be selling a 3.9% stake in due course, it said. Norwegian shares slumped as much as 26%, the most ever, while IAG reversed earlier declines to trade higher.
Bjorn Kjos, the Scandinavian carrier’s chief executive officer, previously rejected two offers from IAG as undervaluing the business.
IAG, which also owns Iberia and Veuling, responded by saying it wouldn’t engage in a bidding war, though CEO Willie Walsh hinted that he was still interested at an investor day in November, fuelling speculation about a sweetened approach.
IAG’s decision to walk away will spur concerns about Norwegian’s ability to weather a cash crunch after the company announced last week that it would close some bases and routes as overcapacity squeezes fares across the industry. Mr Walsh may have been put off by the cuts, as well as a profit warning at rival Ryanair and concerns about market developments as Britain prepares to quit the EU.
Norwegian Air’s €250m of bonds due in December fell six cents on the euro, to the lowest since March, before IAG bought its stake, according to data compiled by Bloomberg.
Mr Kjos, a former fighter pilot, said Norwegian’s strategy will remain unchanged as it pursues plans to “continue building a sustainable business to the benefit of its customers, employees, and shareholders”.
AB Bernstein analyst Daniel Roeska said the chances of IAG entering a further bid had been decreasing, especially with Norwegian likely to require a capital increase in the first half.