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IAG (ICAG) stock rises as Air Europa purchase is terminated

By Neil Dennis

13:47, 16 December 2021

Tailfins of planes operated by IAG
Termination fee of €35 to be paid - Photo: Shutterstock

International Airlines Group, the owner of British Airways and Iberian Airlines, announced the termination of its agreement to buy Air Europa for €500m ($567m) from Spain’s Globalia Group.

IAG said on Wednesday that it was in advanced talks to end the deal, and officially confirmed in a press release sent to that both parties had come to an understanding on Thursday to terminate the agreement.

Working together

Both companies will work together, said IAG chief executive Luis Gallego, to evaluate alternative structures that may be of interest to the two firms, while offering benefits for shareholders and customers.

IAG will pay a €35m termination fee, less than the €40m originally agreed, and any future purchase price, should a new agreement be reached, would be reduced by this amount.

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Short position overnight fee 0.0041%
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Spread 0.8

Initial agreement

The initial agreement was signed in November 2019 when the entire equity of Globalia was valued at €1bn, but this was amended in January this year as market conditions deteriorated.

Gallego said: “It is very disappointing that we have had to terminate the current agreement to acquire Air Europa but the decision makes sense due to the market conditions, the deep crisis resulting from Covid-19 and taking into account our desire to maintain a disciplined approach to capital allocation.”

Stock in IAG rose 2.9% to 129.4p ($1.72) in mid-afternoon trade on the London Stock Exchange.

Read more: IAG expected to terminate €500m Air Europa takeover

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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