South Africa’s government and an investment consortium have ended public-private partnership plans for South African Airways under which the consortium would have taken a majority share in the flag-carrier.
The Takatso consortium had been unveiled as a potential investor in SAA some two-and-a-half years ago.
But finalising the agreement has been a drawn-out process and the country’s department of public enterprises says it has terminated the transaction with Takatso “by mutual agreement”.
“The new corporate plan will embrace more routes and more aircraft,” it states, adding that a strategic advisor will be sought to support the airline’s management in its next steps.
“A new form of raising finances on the basis of the assets of SAA will be explored with financial institutions.”
Takatso had intended to take a 51% share of SAA. But it says the transaction is “no longer in the interests of its stakeholders”.
“Protracted negotiations for a revised transaction structure introduced unacceptable levels of risk and uncertainty,” it states.
Takatso adds that the opportunities in the sector on which it had hoped to capitalise have been “greatly diminished” since the original share-purchase agreement was reached in February 2022.
Market conditions at the time were “conducive”, it says, and the air transport market was “poised for rebound” after the pandemic.
“Takatso was, however, always clear in its analysis, even then, that the opportunities presented by market conditions prevailing at the time were limited in such a competitive market, and time was of the essence in seizing them,” it says.
This situation has deteriorated in the subsequent two-year period, and Takatso points out that the sector is experiencing volatility.
Although the original deal had been binding, the various parties agreed to re-open negotiations a few months ago to re-examine the transaction.
“These negotiations have been protracted,” says Takatso. “The resultant revised transaction structure has introduced unacceptable levels of risk and uncertainty.”
It adds that the scale of the proposed changes could have required a re-assessment by competition authorities – adding further delays – while certain conditions demanded by regulators have still to be met.
“The terms of the proposed revised transaction are simply not workable for Takatso, and we could not, under those circumstances, allow this process to continue to drag on,” it says.
All work on the proposed transaction has stopped. Owing to the decision’s being mutual, neither side will have to pay a termination fee.
