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Merger mania hits Spain

Clickair and Vueling agree to join forces to fight fierce competition in the Spanish market

Merger fever has finally hit Spain, with the shareholders of Barcelona-based low-cost rivals Clickair and Vueling ­having agreed on the terms for integrating the two carriers after months of talks.

A memorandum of understanding approved by Vueling's board in early July sets out the terms for the merged carrier to operate under the Vueling brand and remain headquartered in Barcelona. "The operation will be structured as Clickair's statutory merge into Vueling, by way of the former's extinction and the latter's capital increase," says Vueling. Clickair chief executive Alex Cruz is expected to take the helm if the proposed merger obtains the necessary authorisation to proceed.

Iberia, which holds 20% of Clickair's voting rights but 80% of its economic rights, is widely expected to become the main shareholder in the merged entity with a 45% stake. Under Spanish law, any investor that owns more than 30% of a company's capital is obliged to launch a bid for the entire company. However, Vueling says Iberia has applied for an exemption from this law.

The other key investors in the merged carrier would be Clickair shareholder Nefinsa and Vueling shareholder Inversiones Hemisferio. All of the shareholders have agreed to keep their investment for a period of two years.

Clickair and Vueling have been struggling against strong competition in the Spanish low-cost market, which easyJet and Ryanair have made a major play for, and both carriers incurred losses in 2007. Clickair has amassed a greater market share than Vueling in Barcelona, despite its later launch, but a combined Clickair and Vueling would control almost a quarter of its home market, based on departures. Each carrier operates just over 20 Airbus A320s.

Vueling says it expects the approval process for the merger to take three to four months.

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