El Al to acquire competitor Israir from IDB Group

It has been announced that along with its Sun d’Or International Airlines (2U, Tel Aviv Ben Gurion) unit, El Al Israel Airlines (LY, Tel Aviv Ben Gurion) has entered into an agreement with IDB Development, IDB Tourism and Israir (6H, Tel Aviv Sde Dov) to purchase all issued and paid-up share capital of Israir.
It is understood that IDB will sell all of its shares in Israir to Sun d’Or for US$24 million in cash and a 25% stake in the merged Sun d’Or entity. In return, Israir is likely to take over Sun d’Or’s operations while allocating 75% of its shares to El Al. Once the merger has been completed, Israir will focus on low-cost, domestic flights and El Al holiday packages.
The deal excludes Israir’s two owned A320-200s and two ATR72-500s which will be sold and leased back from an unspecified third party. Should that not happen El Al will be required to purchase the aircraft for at least USD70 million.
Based on their relative shareholdings in Sun d’Or, El Al and IDB will provide guarantees of up to an aggregate amount of US$33 million for the working capital of Sun D’Or and Israir and will, in addition, secure Israir’s liabilities arising from the agreement signed between Israir and its pilots and the New Histadrut Labor Federation.
El Al and Sun d’Or believe that the acquisition of Israir will enable them to expand activities in the areas of outbound and inbound tourism. Currently, El Al anticipates that the deal to be signed within the next few days, with closing planned for December 31, though it will be subject to regulatory and antitrust approvals as well as the finalization of a new collective labour agreement with Israir flight crews.