Frankfurt Catering company Lufthansa LSG Group has a new owner. Financial investor Aurelius is taking over the subsidiary for an undisclosed price. Both companies announced this on Wednesday. The deal is expected to close in the third quarter of this year. Recently, analysts estimated the value of LSG in the range of 500 million to one billion euros.
“We specialize in corporate separations,” Dirk Markus, founding partner of Aurelius, told Handelsblatt. When peripheral areas are put up for sale, the potential often remains untapped. “We want to give LSG management the opportunity to fully focus on business and strategy.”
LSG is active in three areas of activity: traditional catering for airlines under the name LSG Sky Chefs, on-board sales of customized products – so-called Retail in Motion – and supply to non-aviation customers, such as retail.
For example, LSG cooperates with Starbucks and 7-Eleven. “With our new owner, we want to grow in all three areas. We have already identified some projects together,” said Erdman Rauer, CEO of LSG.
Even before the pandemic, Lufthansa’s management decided to sell its catering subsidiary. CEO Carsten Spohr wants to transform the Lufthansa Group into an airline group. Lufthansa has been involved in many areas of aviation in the past. For example, the group offers aircraft maintenance through Lufthansa Technik, while its subsidiary Airplus deals with business trips and their accounting. LSG, in turn, supplies the aircraft with food and beverages.
In the future, the group will focus more on the transportation of people and goods. In addition to the LSG Airplus is also sold. Lufthansa Technik, on the other hand, is looking for an investor who will take up to 20 percent of the shares. Now the process continues.
Lufthansa sold LSG’s European business in 2020
At the same time, it is planned to strengthen the aviation sector. The takeover of the Italian airline ITA is imminent. Spurs have also already expressed interest in Portugal’s TAP. The Lisbon government wants to re-privatize the airline, which was fully nationalized during the pandemic.
In 2019, Lufthansa initially found a buyer for LSG’s European business in Switzerland’s Gategroup Holding AG. In contrast to the current moment, the international LSG must go to an investor with experience in the industry to guarantee the delivery of aircraft to the European airports of the home of the Lufthansa Group.
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The Gategroup deal, which was announced on December 9, 2019, faltered briefly when the pandemic hit, but was then scrapped and completed in December 2020. 7,750 employees changed companies. The price for this area of LSG, whose turnover in the last year before the pandemic was a good 1.1 billion euros, was never disclosed.
Now international business is also changing hands. It includes 131 kitchens in emerging markets, Asia Pacific and the Americas. According to Lufthansa’s annual report, LSG employed about 20,200 people at the end of 2022.
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In 2022, catering sales were 1.96 billion euros, adjusted earnings before interest and taxes (EBIT) were minus eleven million euros, following an operating profit of 31 million euros a year earlier. Like many companies, LSG struggles with high energy and material costs. In addition to these figures, there are additional sales of well over a billion euros, which the company achieves in various joint ventures, but which are not consolidated.
Clearly, LSG employees don’t have to worry about their jobs because of the takeover, CEO Rauer is looking for new employees: “We’ve prepared for the rise in the cost of materials and energy. We are more concerned about the labor shortage.”
A good three years ago, the sale of LSG’s European business caused a lot of outrage among the workforce. Many feared for their jobs and cherished Lufthansa Group assets, including pensions. The Verdi union even threatened LSG workers with a strike in 2019, but then called it off at short notice because the employer made a new offer.
Now Rauer wants to go on a growth course with the global recovery of aviation: “And we are thinking about acquisitions – both in terms of capacity and in terms of food technology.”
LSG also wants to grow in Europe with Aurelius
The manager is also looking at Europe. The fact that he will be competing with Gategroup, which bought LSG Europa three years ago, is not an obstacle for him: “If we did not offer the new owner prospects in Europe, we would not be a global company.”
He also sees growth opportunities in “Retail on the Move.” For example, passengers on board can create their own menu. Even if he travels in economy, you can order wine from business class. This is not yet possible with most airlines. “This business is developed in Europe, in other countries we are just at the beginning. There is still a lot of potential,” said Rover.
>> Read also: Lufthansa is preparing a new airline – and increasing pressure in collective bargaining
“LSG’s strategy makes sense. At the end of the day, it doesn’t matter to us whether the sandwich is eaten on the plane or somewhere else, as long as it brings sales and growth,” said Markus von Aurelius. The former consultant founded Aurelius in 2006 with his colleague Gert Purkert. The company operates throughout Europe and has interests in various companies in Europe. Including Zim, a German manufacturer of aircraft seats.
“We’re a typical private equity investor, our funds have ten to 15-year maturities,” Markus said. A quick resale of LSG should not be expected: “We assume that our commitment will last six to eight years. Corporate spin-offs take time,” says Marcus.
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First publication: 04/05/2023, 11:05