BA shrugs off Air France interest in Iberia
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By Sudip Kar-Gupta and Pete HarrisonPARIS/LONDON (Reuters) - British Airways' chief executive shrugged off rivalry from Air France KLM for Iberia , saying he was confident BA's 3.4 billion euro ($4.69 billion) bid with private equity firm TPG was fair value.Air France KLM said on Monday it might be interested in Spanish airline Iberia but sources told Reutersno move by Air France teamed with private equity firm Apax Partners was expected unless the TPG bid was withdrawn or collapsed."I don't know whether they are interested or not, but it's irrelevant to our assessment of the issue," BA Chief Executive Willie Walsh told reporters on Tuesday."We believe 3.6 euros is a fair price to offer," he said. The consortium led by U.S. private equity firm TPG that includes BA would look at Iberia's books imminently.Media reports said an Air France bid price might reach $5 billion but sector analysts said they still believed that BA, which already owns 10 percent of Iberia, remained in control.Core shareholders in Iberia have the right of first refusal if one of them decides to sell Iberia stock."We believe the interest shown by Air France-KLM in Iberia is principally designed to prevent the Spanish carrier from falling into the hands of BA or Lufthansa without the latter having to pay the price for their ambitions," said a research note from analysts at Oddo Securities.A Lufthansa spokesman repeated the German carrier felt Iberia was too expensive to consider a bid.Iberia is Europe's fourth-largest airline and is particularly strong on routes to central and south America."In Europe, Spain is one of the major markets and Iberia an important player in air transport," Air France KLM said in a statement on Monday. "It is therefore quite normal for it to be examined among others."The statement came as sources told Reuters the TPG-led consortium could move ahead with due diligence on Iberia by as early as the end of this week.TPG declined to comment but sources familiar with the matter said it was working out details with consortium partners BA, Vista Capital, Inversiones Ibersuizas and Quercus Equity.The consortium made its 3.6 euros per share bid approach valuing Iberia at 3.4 billion euros ($4.69 billion) in March and last week Iberia's board set conditions for opening its books.Europe's airlines are consolidating in response to stiff competition from budget carriers at home and foreign carriers eating into longer routes. Arab Gulf-based carriers have grown rapidly and a rise in competition from U.S. airlines is expected after transatlantic rules are eased next March.SPANISH PARTNERSAir France has spoken to private equity firm Apax Partners in the past about Iberia, sources familiar with the matter told Reuters.The Financial Times and Spain's El Economista said on Monday the two were in talks about a possible bid that would involve Spanish publisher Jose Manuel Lara and investor Juan Abello.Apax and Lara both declined to comment on the report.Lara holds a stake in Spanish budget airline Vueling Airlines as did Apax until last month, when it sold out in a move seen by some as a signal it was preparing to take a run at Iberia.Iberia shares have doubled in the last year on bid speculation and were up 0.53 percent at 3.79 euros at 1502 GMT. BA was off 0.63 percent at 436 pence and Air France KLM shares were down 0.41 percent at 34.23 euros.BA has held a stake in Iberia since 1999 and made no secret of the fact that it sees the Spanish carrier as the best fit should it merge with another European major.But Walsh repeated on Tuesday that BA does not intend to invest capital as part of the TPG consortium.Air France is also interested in some form of tie-up with Alitalia despite staying clear of Italy's sale of the airline, Italian newspaper La Stampa reported on Tuesday citing a source at the French airline.Last week, sources familiar with the situation said TPG had re-opened the door for a possible bid for Alitalia if Italy relaxed the auction rules.(Additional reporting by Jane Barrett and Daniel Puente in Madrid, Andreas Moeser in Frankfurt and Jeff Goldfarb and Mathieu Robbins in London)
(c) Reuters 2007. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
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