El Al Israel Airlines (LY, Tel Aviv Ben Gurion) has announced that it along with its Sun d'Or International Airlines (Tel Aviv Ben Gurion) unit have entered into an agreement with IDB Development, IDB Tourism and Israir (6H, Tel Aviv Ben Gurion) to acquire the entire issued and paid-up share capital of Israir.

According to the acquisition agreement, IDB will sell all of its shares in Israir to Sun d'Or for USD24 million in cash and a 25% stake in the merged Sun d'Or entity. In turn, Israir is expected to take over Sun d'Or's operations while allocating 75% of its shares to El Al. After the merger, Israir will concentrate on low-cost, domestic flights and El Al vacation packages.

The trandaction's value excludes Israir's owned fleet of two A320-200s and two ATR72-500s which will be sold and leased back from an unspecified third party. Failing that, El Al will have to buy the aircraft for at least USD70 million.

Additionally, El Al and IDB will, according to their relative shareholdings in Sun d'Or, provide guarantees of up to an aggregate amount of USD33 million for the working capital of Sun D'Or and Israir, and will also secure Israir's liabilities arising from the agreement signed between Israir and its pilots and the New Histadrut Labor Federation.

El Al and Sun d'Or believe that the acquisition of Israir will enable them to expand and diversify their sources of income by, among other means, expanding its activities in the areas of outbound and inbound tourism.

As it stands, El Al expects a finalized deal to be signed in the coming days, with closing planned for December 31. The final deal itself is still subject to regulatory and antitrust approvals as well as the finalization of a new collective labour agreement with Israir flight crews.