British Airways' proposed merger with Spain's Iberia will involve creating a holding company, TopCo, in which BA shareholders will have a 55% stake and Iberia shareholders 45%.
BA chief Willie Walsh will become group CEO and Iberia chief Antonio Vazquez will be group chairman. BA chairman Martin Broughton becomes deputy chair of the combined companies.
The two sides plan to sign a definitive merger agreement in the first quarter of 2010 and present it to shareholders by the following November.
"It has been a long process where many people, both at BA and Iberia, have worked very hard to reach this agreement," says Vazquez. "But in the end it was worth it.
"We are laying the foundations of what will be one of the most important airlines in the world, a real global airline."
Walsh adds: "The merger will create a strong European airline, well able to compete in the 21st century.
"Both airlines will retain their brands and heritage while achieving significant synergies as a combined force."
TopCo will oversee the two separate operating companies. BA finance chief Keith Williams will head the BA operating division while Rafael Sanchez-Lozano will be his counterpart at Iberia.
Walsh and the two operating chiefs will be part of a six-member group management team which will also include Enrique Dupuy De Lome as group finance chief, plus Robert Boyle and Jose Maria Fariza respectively as revenue and cost synergy officers.
TopCo will be created through a share exchange, at a ratio of 1:1 for BA shareholders and 1:1.0205 for shareholders in Iberia. Its operating and financial headquarters will be in London, but the company will be registered in Madrid where most board and shareholders' meetings will be hosted. It will have a primary listing in London and a secondary listing, if possible, in Spain.
The holding company will have a 14-member board, seven from each carrier. Walsh and the two operating company chiefs will sit on the board, and it will have 11 non-executive directors. Each operating company will have a nine-member board. Vazquez and Broughton will respectively remain chairs of the Iberia and BA operating boards.
BA will extend its network by up to 59 new points - 13 in Latin America - and Iberia by up to 98, as a result of the combination which will create a carrier with 205 destinations.
Merger of the carriers remains subject to regulatory and shareholder clearances. Iberia will be able to cancel the merger agreement if the outcome of BA's pension discussions is unsatisfactory to the Spanish carrier, and the two sides have agreed a 'break fee' of €20 million ($30 million).
Source: Air Transport Intelligence news
