After months of negotiations, Israeli flag carrier El Al (TLV: ELAL) said its Sun d’Or unit reached a preliminary agreement to acquire smaller rival Israir from IDB Tourism, controlled by Argentine investor Eduardo Elsztain, for cash and stock in combination with a separate sale leaseback deal.
IDB Development reportedly estimated that it would receive over $150 million in the aggregate as a result of the deal.
IDB will receive up to $24 million in cash and a 25 percent equity stake in Sun d’Or. In addition, Israir is expected to sell its aircraft for $70 million either to a third party or El Al, through a sale leaseback arrangement.
The move comes as El Al is seeking to forestall aggressive competition from low-cost carriers.
Israir, which flies to 28 cities in Europe, will become a wholly owned unit of Sun d’Or, which flies to 17 destinations in France, Italy, Switzerland, Greece and elsewhere in Europe.
Israir under CEO Uri Sirkis, who according to Haaretz is expected to become the merged company’s chief executive, has transformed itself from an airline into a tourism company and has seen its passenger loads climb sharply.
The deal is consistent with El Al’s long-term strategy of expanding and diversifying its products and services, “enabling us to grow the group’s revenue and accelerate growth,” said David Maimon, El Al’s chief executive David Maimon, according to Reuters.
The deal is expected to close by year-end, subject to regulatory antitrust approval, and signing of a new collective agreement with Israir pilots.
Since its inaugural flight from Geneva to Tel Aviv in September 1948, El Al has grown to serve over 50 destinations, operating scheduled domestic and international services and cargo flights within Israel and to Europe, Middle East, Americas, Africa and the Far East. from its main base at Ben Gurion Airport. El Al is the only commercial airline to equip its planes with missile defense systems, and is considered one of the world’s most secure airlines.