Acquisition of Buzz
Ryanair Holdings PLC
31 January 2003
RYANAIR REACHES AGREEMENT WITH KLM TO BUY BUZZ
Ryanair Holdings plc, the No.1 low fares airline in Europe today (Friday, 31st
January 2003) announced that it had reached agreement with KLM to take over Buzz
for a total payment of €23.9m (less than £15m) which it will fund from its own
substantial cash reserves without any recourse to the markets. Highlights of
this transaction include;
1. Ryanair will buy the entire issued share capital of Buzz for a total of
€23.9m (£14.95m). Since Buzz will have €19m (£11m) of cash on completion the
net cost of this purchase is less than €5m.
2. The acquisition will be funded from Ryanair's existing cash deposits which
presently exceed €1.05 billion, so the cost is nominal to Ryanair.
3. In the year to 31 March 2003 Buzz will fly just under 2m passengers,
generating revenues of €140m, with a forecast double digit PBT loss.
4. Buzz currently operates a network of 21 routes from London Stansted to points
in Germany, Holland, France and Spain, as well as two French domestic
routes. The company will operate a fleet in Summer 2003 of 6 x BAe 146
aircraft and 6 x Boeing 737-300's.
5. As part of the transaction KLM have agreed to take back all of the remaining
BAe146 aircraft at the end of the financial year (31/3/04). We currently
plan that these will be replaced by more efficient Boeing 737's.
6. The management believe that by applying Ryanair's low fares/low cost formula,
the traffic in Buzz can be increased this year from under 2m to over 4m
passengers and the operating losses will be eliminated and profitability
achieved.
7. The acquisition is expected by the Directors of Ryanair to make a positive
contribution to Ryanair's earnings per share in the coming financial year
(end 30 March 2004).
8. This acquisition, which has been approved by the Boards of KLM and Ryanair,
is expected to be completed, subject to regulatory approval on 1 April next.
Michael O'Leary, Chief Executive of Ryanair said;
'The timing of this acquisition is opportunistic. Since Ryanair is growing
strongly by rolling out our lowest fare services all over Europe, the last thing
we need is the distraction of an acquisition. However there are a number of
features of Buzz which makes this a favourable move at this time including;
1. Buzz operates 21 routes from London Stansted which is Ryanair's main UK base,
thereby making it's turnaround easy to manage.
2. The acquisition of Buzz allows Ryanair to further expand at Stansted,
London's third main airport, and is a timely strategic move.
3. The cost of the Buzz acquisition is nominal at a net cash cost of under €5m,
which will be a bargain if we can- as we expect - turn it around in one
year.
4. Buzz's operation suffers from two structural cost problems, (1) an
inappropriate expensive fleet and (2) expensive congested airports. Ryanair
can and will resolve both problems within 12 months.
5. Ryanair will significantly rationalise Buzz's operations by closing a number
of high cost unprofitable routes and operating the remaining routes at
increased frequency, lower fares and much lower costs.
6. Buzz's BAe-146 fleet will be redelivered without cost to KLM within the year,
to be replaced by significantly more efficient Boeing 737's.
'I am confident that this significant and timely rationalisation will eliminate
these losses in Buzz over the coming year. With a change of aircraft fleet Buzz
will be in a position to match Ryanair's low fare, profitable growth from 2004
onwards.
'Customers of Buzz can look forward to new routes, increased frequency, larger
aircraft and significantly lower air fares from 1 April onwards. We will be
announcing details of this reorganisation including new routes, frequencies,
lower fares and timetables before the end of February as we implement our plan
to transform Buzz into a growing, profitable operation.
'Since the Buzz acquisition will not take place until 1 April at the earliest,
the current Buzz losses will have no impact on Ryanair's full year earnings
forecasts. Whilst it has been our policy to avoid acquisitions, this
opportunity, at this nominal cost is the type of offer which we could not
refuse. The financial cost is small and the diversion of management time will be
minimal since Buzz is based at our main UK base. We have a simple and effective
plan to turn it around by delivering lower fares, rapid traffic growth and
Ryanair type profitability once the BAe146 fleet has been returned to KLM. I am
confident that Buzz will thereafter make a proportionate and significant
contribution to Ryanair Holdings' revenues and profitability'.
As Ryanair is due to report Q.3 results on Tuesday morning (4 Feb'03) we are
currently in a closed period, and will not be making any further comment on this
matter until then. A full analysts briefing and subsequent press conference are
scheduled for Tuesday morning in London for this purpose.
Ends. Friday, 31st January 2003
For further information
please contact:
Michael O'Leary
Ryanair
Tel. +353-1-8121212
Pauline McAlester
Murray Consultants
Tel. +353-1-4980300
This information is provided by RNS
The company news service from the London Stock Exchange
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