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BA & Iberia merger approved

Wed 1st Dec 2010

Over 99% of BA shareholders voted in favor of the merger with Spain's flagship carrier earlier this week in London. Iberia shareholders approved the deal, which will create Europe's third largest airline by revenue, shortly after.

Under the terms of the partnership, first signed by the companies in April, BA shareholders will receive one new share of the merged company, International Airlines Group (IAG), for each existing share in the British carrier, while Iberia shareholders will get 1.0205 new shares for each existing Iberia share.

BA will own 56 per cent of IAG, while Iberia will have the remaining 44 per cent of the new company, according to Dow Jones Newswires.

British Airways chief executive Willie Walsh said the new structure would be used as a basis for further purchases in the push to cut costs and penetrate new markets.

He said that the merger will generate 400 million euros of synergies in the fifth year and give it the option of adding flights in Madrid, easing congestion from London's Heathrow, Europe's busiest airport.

UK airline had a market value of £3.18 billion before the start of trading Monday after the stock advanced 46% this year. Iberia was worth 3.1 billion euros following a 70 per cent gain, giving the tie-up a combined value about 6.6 billion Euros.

Some individual shareholders voiced concern about ending the full independence of one of Britain's most iconic brands, as well as plans to host future annual meetings in Madrid. Cabin crew also expressed frustration over disagreements between the two sides, including significant pay rises planned for members of the board post-merger.

Others questioned Spain's economic troubles and what a potential bailout would mean for the new airline.

"I don't think the group will be affected in any way," Walsh said, adding that one of the strengths behind Iberia lies with its Latin American routes.

The airlines expect the merger to be completed January 21, and the shares to list on the London Stock Exchange and Spanish Exchange on January 24.

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