Daily Management Review

Lufthansa’s European Catering Biz Is Sought O Be Merged With Peers: Reuters


Lufthansa’s European Catering Biz Is Sought O Be Merged With Peers: Reuters
The pressure put on Lufthansa low margins in a competitive market of Europe is pushing the company to merge the European operations of its catering business LSG with a peer, according to a report published by news agency Reuters citing sources with knowledge of the matter. 
According to the report, information to potential bidders has already been delivered by Lufthansa and the company has potential suitors to place their bids for the business during the first week of April. The sources reportedly also told Reuters that Lufthansa did not want to make any business with any private equity.
The sources also told Reuters that expected to make offers for the European LSG operations would be Austria’s Do&Co and Switzerland’s Gategroup. The sources also reportedly added that Do even the medium-sized &Co could strike a deal without a partner given the of its low profitability and low expected value for the business.
Lufthansa confirmed its plans for considering various options for its LSG business. But there were no comments available from the Gategroup and Do&Co to queries form Reuters on the issue.
The report also mentioned that the company could also go for a deal for the entire international business at a later stage even as Lufthansa is now completely only focusing on finding an appropriate buyer for its European operations.
Lufthansa’s Chief Executive Carsten Spohr had said recently that the large number of locations it serves is one of the major drags for the catering business of Lufthansa. Spohr had also pointed out to the exposure of the business to currency exchange rates and high staff costs to be the other reasons for it not doing well.
There was a 39 per cent increase in the adjusted earnings before interest, tax, depreciation and amortization for Lufthansa’s LSG group last year – touching 181 million euros, against revenue flat revenues growth at 3.2 billion euros. The business employs 35,500 staff.
According to the news report, the international business generated the majority of the profits. A regional split of the figures is not provided in its reports by Lufthansa. Lower restructuring costs had however helped the figures.
With a a market capitalization of 735 million euros, Do&Co is a firm that is backed by gastronomy entrepreneur Attila Dogudan and has clients at 60 airlines which includes Lufthansa’s Austrian unit. In 2018, 61 million in 2018 EBITDA on sales of 574 million was posted by the core catering business of the company.
Chinese conglomerate HNA owns Gategroup. According to the Reuters report quoting sources, the current financial strains at HNA could prevent it from entering in a major cash deal.