Air France-KLM Circling Iberia
Lionel Laurent, 07.17.07, 12:47 PM ET
LONDON - Only four days after Spanish airline Iberia declared itself ready to engage with a British Airways-led consortium offering nearly $5 billion for the company, the rival bidder it has been desperately hoping for may have arrived in the form of Air France-KLM.
Air France-KLM (nyse: AKH - news - people ) said in a statement on Monday that "Spain is one of the foremost markets and Iberia (other-otc: IBRLF - news - people ) is a significant player in air travel," adding that the Spanish carrier was being studied from the perspective of "consolidation vital to the efficiency and profitability of the sector."
A source close to the situation said that the Franco-Dutch airline had been in talks with British private equity group Apax Partners, as well as several other Spanish interests, for some time. He added that nothing concrete had been finalized and that the statement from the airline was attributable more to intense commentary surrounding potential bidders for Iberia. "Their hand has probably been forced," he remarked.
There could be another reason for hitting the gas pedal and revving up a bidding war. Iberia decided last week to open up its books to a consortium led by another private equity group, Texas Pacific, and British Airways (other-otc: BAIRY - news - people ), which owns a 10% stake in the Spanish carrier. The consortium tabled an offer of 3.4 billion euros ($4.7 billion), or 3.6 euros ($4.96) per share, back in May. But Iberia seemed reluctant even to acknowledge the bid, desperately hoping a better offer would come along. With Lufthansa (other-otc: DLAKF - news - people )'s Chief Executive Wolfgang Mayrhuber declaring Iberia "overvalued" and the British Airways consortium refusing to up the price, the bidding war looked stalled at the takeoff stage. (See "Iberia Takeover: From Fiesta To Siesta?")
But if Air France-KLM is ready to wade in at a time when takeover speculation has boosted Iberia's share price by 90% over the past year, buying the Spanish carrier may prove costlier than British Airways anticipated.
Shares in Iberia pushed up 2 euro cents (3 cents), or 0.5%, to 3.79 euros ($5.22) on Tuesday. Air France-KLM fell 12 euro cents (17 cents), or 0.4%, to 34.25 euros ($47.20), while British Airways sank 4.50 pence (9 cents), or 1%, to 434.25 pence ($8.88).
For the moment, however, Iberia is still looking at only one firm offer. And British Airways would be a better fit for the Spanish carrier, given the two airlines' close ties and profit- and revenue-sharing joint venture for U.K.-Spain routes. Still, the possibility of a duel will reassure those who feared a one-bid show. |
