The board of Icelandair Group has made a purchase agreement to buy all of low fare airline WOW Air's stocks, Mbl.is reports. The purchase is made on the condition that it goes through an approval at an Icelandair Group stockholders meeting, the approval of the Icelandic Competition Authority, and a due diligence inspection.
Skúli Mogensen, sole owner and founder of WOW Air, will, granted that he meets conditions, receive 272,341,867 shares as an exchange for his current WOW Air shares. The shares will amount to 5.4% of Icelandair Group's stock
The two companies will still be operated under their current brand names. Their conjoined market share on the Atlantic aviation market will be about 3.8%. The takeover will create opportunities for an expansion into new markets, and it is expected that Icelandair Group's unit cost will lower substantially. The company will be even better prepared to compete with other airlines on the international aviation market.
Bogi Nils Bogason, the CEO of Icelandair Group, had this to say: "WOW Air has in recent years built a strong brand and achieved considerable success in their markets, to and from Iceland and over the Atlantic. There are great opportunities for streamlining but the companies will continue to run in their own respective ways under their own brand names and air operating licenses. The Icelandic travel industry is a lynchpin of the Icelandic economy and its important that air transport to and from the country is in sure hands".
Skúli Mogensen, founder and CEO of WOW Air, stated: "I'm very proud of our success and what we at WOW Air managed to build up in the last years, and I'm also grateful for the fantastic reception we've had since the very first day. We've built up a strong team which has had noteworthy success and been a pioneer in low-fair aviation across the Atlantic. We've now begun a new chapter for WOW Air which gets the opportunity to grow with a strong backer in Icelandair which will strengthen WOW Air's foundation further in international competition".
WOW Air and Icelandair have both faced some financial difficulties in recently. WOW Air recently announced that it will be cutting US destinations. Meanwhile, Icelandair has held discussions with creditors and the Icelandair Group has recently decided to sell its hotel operations Icelandair Hotels and Hotel Edda.
An Icelandair Group shareholder meeting will be held to make a final decision on the purchase. The meeting will take place in no more than three weeks time. Stocks in Icelandair rose by 53% when the Icelandic stock exchange opened yesterday, after the announcement of the takeover had been made.