=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SFGate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/n/a/2005/03/22/financial/= f084121S30.DTL --------------------------------------------------------------------- Tuesday, March 22, 2005 (AP) Lufthansa Says Swiss Airline Takeover OK'd By PETER HODY, Associated Press Writer (03-22) 14:52 PST ZURICH, Switzerland (AP) -- German airline Lufthansa signed an agreement Tuesday to take over struggling Swiss International Air Lines after receiving approval from the Swiss government and other major shareholders of the national carrier. Members of the Swiss cabinet said they decided to accept the Lufthansa takeover deal, worth up to 310 million euros ($406 million), because it was the best possible solution for the financially troubled airline. Other major shareholders, including large Swiss banks, said they also approved. "In the Lufthansa group, Swiss will be in the position to maintain connections to the rest of the world and possibly even expand them," said Swiss Chief Executive Christoph Franz. Franz, Swiss Chairman Pieter Bouw and Lufthansa CEO Wolfgang Mayrhuber sought to allay Swiss concerns that the country was losing control of its flag carrier. "Swiss remains Swiss, also with Lufthansa," Mayrhuber said at a joint ne= ws conference near Zurich Airport. The first major European airline deal since Air France acquired KLM Royal Dutch Airlines in 2003 will allow Lufthansa to tap into the Swiss carrier's much-vied for business and first-class customer base. Shareholders representing 82.98 percent of Swiss shares had approved as well, the company said. Due to air traffic regulations and antitrust rules, Lufthansa said it would initially put Swiss shares into a new company called AirTrust, of which it would hold 11 percent. Once antitrust approval is gained, the stake would be raised to 49 perce= nt and after aviation regulatory approval, to 100 percent, the company said. European Union Transport Commissioner Jacques Barrot has said he agrees in principle with a takeover, but the final decision lies with EU competition authorities. Lufthansa said large shareholders of Swiss would get what it called an earn-out option, for which it would pay an aggregate 265 million euros ($347 million), and would spend some 45 million euros ($59 million) to buy out the free-float shareholders. The company statement didn't provide a share price for its buyout offer. Swiss has suffered massive financial problems since it was created out of Swissair in 2002. It has blamed its continuing financial problems on global economic instability, the SARS crisis in Asia, the Iraq war, high oil prices and competition from low-cost carriers in Europe. The government and business put in more than 4 billion francs ($3.4 billion). Swiss has racked up aggregate losses of 2 billion francs ($1.7 billion). "It is possible that Swiss would have broken even in the coming year, but breaking even isn't good enough," said Swiss Finance Minister Hans-Rudolf Merz. "In the future Swiss would have had to make a profit." Lufthansa shares rose 0.7 percent to 11.16 euros ($14.70) in Frankfurt trading. Swiss had suspended trading of its shares "to prevent any uncertainty on the capital markets." ____ Associated Press Writers David McHugh in Berlin, Alexander G. Higgins in Geneva and Balz Bruppacher in Bern contributed to this report. ---------------------------------------------------------------------- Copyright 2005 AP