Lufthansa in talks to sell 20% of maintenance arm Technik – sources

By Emma-Victoria Farr and Ilona Wissenbach

LONDON (Reuters) - Lufthansa is holding talks with buyout funds as it seeks to sell about 20% of its aircraft maintenance business Technik, three sources familiar with the matter told Reuters.

The German airline has abandoned plans to list a minority stake in the business given stock market volatility after Russia's invasion of Ukraine, the sources said, speaking on condition of anonymity.

Citigroup and JPMorgan are advising on the stake sale which could value Technik, one of the biggest global players in aircraft repair, at five to eight billion euros ($5.35-$8.57 billion) including debt, two of the sources said. Private equity firms are working to prepare bids for a 20% stake ahead of an auction process which is expected to kick off later this year, one of the sources said. Lufthansa is seeking a long-term investor and would only pursue a stock market listing of Technik at a later stage, this source said.

The decision comes days after Air France-KLM said it had entered talks with private equity firm Apollo Global Management for a 500 million euro injection into a repair unit as airlines reshape balance sheets post-pandemic.

In June 2020, the European Commission approved German plans to contribute six billion euros to the recapitalisation of Lufthansa's parent company Deutsche Lufthansa AG.

Global airlines are facing competition from standalone maintenance firms in Asia and elsewhere, and increasingly from airplane manufacturers themselves, in the expanding market for overhaul and other services.

Chief Executive Carsten Spohr said during an analyst call in March that Lufthansa wants to finalise a deal for Technik in 2023 as part of its recovery strategy emerging from the coronavirus pandemic. Lufthansa is also looking to divest the U.S. business of its subsidiary LSG Group, an airline catering and hospitality service provider which it considers a non-core asset, two of the sources said. It sold the European operations of LSG to Swiss airline catering firm Gategroup in 2019. Meanwhile, Lufthansa has teamed up with shipping group MSC on a joint bid for ITA Airways, the successor to Alitalia.($1 = 0.9339 euros)

(Reporting by Emma-Victoria Farr and Ilona Wissenbach, additional reporting by Tim Hepher, editing by Pamela Barbaglia and Kirsten Donovan)