The Icelandair Group has scrapped its planned takeover of Iceland-based low-cost carrier Wow Air as said that “pre-conditions for a shareholders meeting on the matter were unlikely to be met”.
The group was to discuss and vote on whether to takeover Wow for £16 million at a shareholders’ meeting tomorrow (30 November).
The Icelandair Group said it is “unlikely” that the board of directors of Icelandair Group can recommend to the shareholders that they agree to the purchase agreement.
Icelandair Group chief executive Bogi Nils Bogason said the acquisition of Wow “will not go through”, adding that the situation is “disappointing”.
The group said it is not intending to propose a deferral of a decision on the acquisition to shareholders. “Due to this this situation, both parties agree to abandon the aforementioned purchase agreement,” it added.
This week Wow handed back four aircraft and is facing a cash flow crisis after what it called “materially worse than originally anticipated” results for the last quarter.
Wow’s problems are reportedly to arise from conditions attached to Icelandair bonds worth about £160 million. Two Airbus A330s, an A321 and an A320 have flown from Keflavik Airport to be returned to lessors.
The airline has called the move part of a “necessary restructuring” and chief executive, Skuli Mogensen (pictured left) has written to bondholders saying “a number of external and internal events have unfortunately worsened significantly” since a bond issue in September.
A sale-and-leaseback deal that was expected to raise $25m (£11.7m) has reportedly been cancelled and Wow is now seeking long-term funding to continue operations, a move that it says is a “necessity for the business”.