Air France-KLM Group is considering a sale of a stake in Servair, the world’s third-largest inflight caterer valued at 300 million euros ($380 million) according to analysts, three people with knowledge of the situation said.
Europe’s biggest airline, seeking to cut costs and raise cash, has hired Lazard Ltd. (LAZ) to assess interest in Servair, which has 10,250 staff and 797 million euros in sales, said one of the people, who declined to be identified because the process is private. No decision has been taken on a sale or the size of the holding that might be made available, all three people said.
Air France has said there’ll be “no taboos” as it seeks to identify more than 2 billion euros in annual savings by the end of June. The Paris-based company had been unusual in trying to build a profit center around providing food, something airlines are increasingly outsourcing as they focus on core operations.
“This is credible,” said Yan Derocles, an analyst at Oddo & Cie in Paris with a “buy” rating on Air France (AF) stock. “Servair is among assets we think could be undervalued, plus it’s a full subsidiary, which is not the case with some other activities, and there aren’t a lot of synergies with the main airline.”
About three-quarters of Servair’s revenue is derived from catering, its website says, with 14 percent from cleaning and 7 percent from airport restaurants and duty-free sales. The unit also provides consulting and lounge-management services.
Founded in 1971, Servair says it supplies 49 types of cuisine to more than 120 airlines and has 9 percent of the inflight-catering market. The unit operates from 75 global sites which deliver more than 230,000 meal trays per day, about 100,000 of them at Paris’s Charles De Gaulle and Orly airports.
An Air France-KLM official declined to comment on the company’s plans for Servair when contacted today.
Alexandre de Juniac, chief executive officer at the group’s French unit, who said May 24 that all ways of cutting costs will be considered, didn’t return calls from Bloomberg yesterday, while Philippe Calavia, group chief financial officer, said by e-mail that as a Servair board member he was unable to comment.
Richard Creswell, a spokesman for Bermuda-based Lazard, the biggest independent merger adviser, also declined to comment.
Air France-KLM closed 3.3 percent higher at 3.26 euros in Paris, paring the stock’s decline this year to 18 percent.
Servair is particularly attractive because of its presence in markets such as Africa, according to Oddo’s Derocles, who puts the business’s value at 300 million euros. That might attract interest from industry leaders LSG Sky Chefs, owned by Deutsche Lufthansa AG (LHA), and Gategroup Holding AG (GATE), together with private-equity firms and catering companies, the analyst said.
While selling a stake in Servair won’t in itself satisfy Air France’s savings and cash requirements, an impending deal with unions to cut jobs could result in under-utilized assets such as real estate which might also be sold off, he said.
Still, Air France-KLM may find itself auctioning Servair just as Lufthansa seeks a buyer for its own LSG Sky Chefs unit, the No. 1 inflight caterer with 30 percent of the market.
Lufthansa is weighing a sale of a majority stake in Sky Chefs and values the whole business at as much as 1 billion euros based on 2011’s earnings of 147 million euros, though no final decision has been made, according to one of the people.
Europe’s second biggest airline said May 30 it may scrap as many as 1,000 of 29,600 jobs at the catering arm as part of a plan to shave 1.5 billion euros from group-wide expenses through 2014 after a 381 million-euro first quarter operating losses.
Claudia Lange, a spokeswoman for Cologne-based Lufthansa, said by telephone that there are no grounds for speculation about the company’s holdings, while adding that assets have been sold in the past and that Sky Chefs is “working on heightening profitability” as part of the wider savings plan.
Financial Times Deutschland reported June 4 that talks on selling as much as 49 percent of Sky Chefs were advanced, with Lufthansa seeking a partner from the catering industry. Vienna- based Do & Co Restaurants & Catering AG (DOCO), which prepares food for more than 60 airlines, said June 6 it would look at the unit, confirming CEO Attila Dogudan’s comments to Der Standard.
Sky Chefs has around 200 kitchens, ranking it world No. 1 ahead of Zurich-based Gategroup, which has 130.
Gategroup was founded as the Gate Gourmet unit of Swissair in 1992 and doubled in size in 1999 with the $780 million acquisition of Dobbs International Services, the U.S. No. 1. The business was bought by U.S. buyout firm Texas Pacific Group in 2002 when Swissair collapsed. It was sold to investors in 2007 and listed on Switzerland’s main stock exchange in 2009.
Spokesman John Bronson said Gategroup had no comment on either the Servair or Sky Chefs businesses.
Lufthansa ended the day 5 percent higher at 8.62 euros in Frankfurt, with it and Air France-KLM the top two performers on the seven-member Bloomberg EMEA Airlines Index. Gategroup was priced up 1.1 percent at 26.55 Swiss francs in Zurich.