British Airways Plc, Europe’s third- largest airline, joined private equity investors TPG Inc. and Vista Capital SA in possible bid for Iberia Lineas Aereas de Espana SA aimed at protecting joint operations with the carrier.
The airline has ruled out any further investment in the airline and will not make an independent offer for Iberia, London-based British Airways said in a statement distributed by the Regulatory News Service on 22 May.
Iberia’s shares have risen 42% this year, valuing the company at 3.74 billion euros ($5 billion) on speculation of a takeover. Latin American routes make Spain’s biggest carrier an attractive target for airlines and private equity groups including Fort Worth, Texas-based buyout firm TPG. British Airways, Iberia’s largest shareholder, jointly manages routes between the UK and Spain with the carrier.
“To retain influence over Iberia without having to put money in is a sensible move,” said Chris Avery, an analyst at JPMorgan in London with a “neutral” rating on the stock. “BA is highly likely to retain its joint routes and a significant influence over the ownership.”
The Spanish partners in the possible offer are Inversiones Ibersuizas and Quercus Equity, the airline said.
British Airways controls 10% of Iberia and has right of first refusal on another 30% of Iberia. That means the airline could repel a hostile bid or hold out for a higher price. At least 51% of Iberia’s capital must remain in Spanish control so the airline can meet aviation agreements with Latin American countries.
The UK carrier said in April it was assessing “how to use” its stake in Iberia and was examining a range of options including “full disposal” or a joint bid with private equity investors. It ruled out an independent offer for the airline.
TPG, formerly known as Texas Pacific Group, said 30 March it was considering a 3.4 billion-euro bid for Iberia as trans- Atlantic carriers prepare for more access to routes. A new aviation treaty, the so-called “open skies” accord, between the US and the European Union has triggered interest in industry consolidation.
Iberia has a fleet of 225 planes and flies to destinations including Buenos Aires, Rio de Janeiro and Miami. The company posted a first-quarter profit of 12.2 million euros compared with a loss of 45 million euros a year earlier because of growth on long-distance routes.