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Lufthansa Said to Hire JPMorgan for Caterer Stake Sale

Lufthansa Said to Hire JPMorgan to Sell Inflight Caterer Stake
LSG Sky Chefs provides 492 million meals to over 300 airlines around the world, and has a market share as high as 40 percent in the U.S. and Europe, according to its website. Photographer: Volker Hartmann/DDP/AFP

Deutsche Lufthansa AG, Europe’s second-largest airline, has hired an investment banking adviser to push ahead with the sale of a stake in the world’s biggest inflight caterer, people familiar with the matter said.

The Cologne, Germany-based carrier has mandated JPMorgan Chase & Co. of New York to help seek a buyer for LSG Sky Chefs after advisers pitched for the mandate, said the people, who asked not to be identified because the talks are private. Lufthansa and JPMorgan officials declined to comment.

Lufthansa has been selling non-strategic units since Christoph Franz became chief executive officer in 2011 as it focuses on improving margins. It sold the BMI airline unit to competitor International Consolidated Airlines Group SA in April, wound up its Jade Cargo International Co. joint venture with Shenzhen Airlines in June and has investigated selling a stake in the Lufthansa Systems business.

“The group as a whole is not getting the credit for being more focused under the current CEO, and this may be a way of highlighting that to the market,” London-based Espirito Santo analyst Gerald Khoo, who rates Lufthansa neutral, said by telephone. “Theoretically, if you want to highlight the value of a subsidiary, you can sell a stake in it.”

Catering Consolidation

The stock fell as much as 2.4 percent to 11.62 euros, and was 0.6 percent lower as of 2:03 p.m. in Frankfurt trading. The shares have gained 29 percent this year, valuing the company at 5.44 billion euros ($6.93 billion).

Larger European competitor Air France-KLM Group SA is also still exploring the possible sale of a stake in Servair, the world’s third-largest inflight caterer, a person familiar with the matter said today. Cedric Leurquin, a spokesman for Air France, declined to comment.

Lufthansa assumed management of Finnair Oyj’s catering subsidiary in August, having earlier halted a deal to buy the unit due to an investment freeze. The airline in May announced plans to cut as many as 1,000 catering jobs as part of a companywide 1.5 billion-euro savings program.

Assuming its current name after Lufthansa completed the takeover of U.S.-based Sky Chefs in 2001, the catering unit provides 492 million meals to over 300 airlines around the world, and has a market share as high as 40 percent in the U.S. and Europe, according to its website. Last year, revenue totaled 2.3 billion euros and the unit has more than 28,000 employees.

Operating profit grew 12 percent in 2011 to 85 million euros and growth opportunities are being created as airlines in Asia, the Middle East and Africa look to outsource food service, according to the annual report.

Sky Chefs has around 200 kitchens, ranking it world No. 1 ahead of Zurich-based Gategroup, which has 130.

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