EU clears Lufthansa outsourcing deal with IBM

Reuters News
Posted: Dec 17, 2014 6:55 AM

FRANKFURT (Reuters) - The European Commission said on Wednesday it had approved the sale of Lufthansa's <LHAG.DE> IT infrastructure unit to IBM <IBM.N>.

Lufthansa was seeking a buyer for the unit, which provides data centers, networks and telephony, because it requires a high level of investment and economies of scale, which the airline could not provide.

"The Commission concluded that the proposed acquisition would not raise competition concerns given the very limited overlaps between the parties' activities and the presence of several strong alternative players that would remain active after the merger," the EU executive said in a statement.

The deal, which was announced on October, will result in a one-off pre-tax charge of 240 million euros ($299 million) for Lufthansa. It will allow Lufthansa to reduce its annual IT costs by around 70 million euros a year.

Under the planned deal, Lufthansa will outsource all its IT infrastructure services to IBM under a seven-year deal and the U.S. firm will take over the airline's IT infrastructure division, currently part of Lufthansa Systems.

The transaction was examined by the European Commission under the normal merger review procedure.

(Reporting by Harro ten Wolde, editing by David Evans)