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Wed, Nov 28, 2007 - Page 10 News List

British Airways drops takeover plan for Iberia


British Airways (BA) abandoned on Monday its takeover plans for rival carrier Iberia, leaving a rival group of Spanish investors unopposed in their bid to take over Spain's biggest airline.

British Airways had made an informal approach for Iberia with a group of private equity groups including Texas Pacific Group, but earlier this month a group of Spanish investors unveiled proposals for a higher offer.

A statement from the BA-led consortium sent to the Spanish market regulator CNMV on Monday said: "We have decided to withdraw our indication of interest in the company."

On Nov. 15, the Spanish investors led by private equity group Gala Capital unveiled a rival informal offer priced at 3.60 euros to 3.90 euros per Iberia share, valuing Iberia at up to 3.7 billion euros (US$5.4 billion).

This compared with the offer of 3.60 euros a share presented by the British Airways consortium.

British Airways' share price dropped 4.63 percent to close at 329.75 pence on London's FTSE 100 on Monday, with investors speculating that the airline was set to abandon the chase.

Earlier, BA had said it had decided not to exercise options to acquire an extra 14 percent stake in Iberia, a clear indication that it did not plan to pursue its takeover plans.

It already owns 9.95 percent.

While BA is seen as wanting to spread its wings across the Latin American market, analysts have also suggested that the British airline is looking to grow to fend off a possible takeover itself.

British Airways is also facing increased competition after EU transport ministers early this year cleared plans to free up transatlantic routes between Europe and the US.

Iberia was privatized in 2001 and is the leading carrier linking Europe and Latin America, accounting for 18.7 percent of the market.

Spanish logistics company Logista said last week it would sell its 6.7 percent stake in Iberia, while BBVA, Spain's second-largest bank, said it would also offload its 7.3 percent stake.

Spanish savings bank Caja Madrid has exercised an option to buy the stakes belonging to Logista and BBVA, but will not form part of the Gala Capital consortium.

British Airways chief financial officer Keith Williams said in a statement earlier on Monday that "British Airways' position as Iberia's key industrial partner remains important and is not dependent on an increase in shareholding."

As well as BA, Caja Madrid, BBVA and Logista, Iberia's other key shareholder is Spanish department store owner El Corte Ingles.

"We will enter into discussions with Caja Madrid in order to maximize the value of our relationship with Iberia," Williams said.

Under a preemption agreement signed in 1999, if any of the core shareholders in Iberia wants to sell their shares, the remaining core shareholders have the right to buy, BA said.

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