SA Bidco gets thumbs up to buy Comair

BA’s local operator Comair to be bought by BidCo after Competition Commission approval.

SA Bidco, a new South African entity, has been given the green light to buy the local operator of British Airways, Comair. The company has no commercial operations or trading history.

The Competition Commission said on 29 October that it had approved the proposed transaction between the two companies on condition that it would not result in a horizontal overlap. The commission contended that the proposed transaction will not result in any market share accretion or any change in the competitive landscape in any relevant market.

The proposed transaction was aimed at ensuring the long-term sustainability and viability of Comair, as the company has not been doing business since May. In June Comair filed for voluntary business rescue and cautioned shareholders that its profits for the year would fall more than 100 percent.

The aviation entity also operates low-cost airline Kulula, and said in a statement that it expected its earnings a share and headline earnings a share to plummet far below 192.4c and 197.2c respectively, recorded during the corresponding period last year. The company reported a R564 million loss for the first half of 2020, due to the coronavirus lockdowns that ravaged the global aviation industry.

In September Comair indicated it would be approaching lenders for additional funding of more than the R1 billion required for it to operate again based on adoption of the rescue plan and at least another R1.4 billion additionally to get flying again. R600 million of that would be committed to new debt while the remaining R800 million would be deferred debt, with capital payments deferred for a year and interest for six months.

It said a number of former board members and executives would invest fresh equity of R500 million in return for a 99 percent shareholding once the suspensive conditions have been met.

Comair planned to gradually return to service from December, with a seven-month ramp-up period until June 2021.

The SA BidCo transaction would cost at least 200 job losses, leaving the total staff complement at around 1,681 as the new airline downsizes post-merger. Comair and SA BidCo committed to make offers of employment to all retrenched staff when jobs become available at the new airline post-merger.

The merged entity also committed to allocate a portion of its shares to a B-BBEE structure, which will include an employee share ownership programme. The commission said the proposed B-BBEE initiative was a positive public interest outcome and will promote the public interest objectives in the Competition Act.