TPG-BA consortium walks away from Iberia(2)

US buyout firm TPG Capital has abandoned its second bid for a national carrier this year, as the consortium it formed alongside UK airline British Airways has walked away from its bid for Spanish rival Iberia.

The TPG Capital-British Airways (BA) consortium bidding for Spanish airline Iberia has withdrawn its bid after pressure from local bank Caja Madrid.

The decision came after UK airline BA confirmed in a statement yesterday it would not exercise its pre-emption rights over the holdings in the airline owned by BBVA (7.3 percent) and Logista (6.7 percent).

Instead, Caja Madrid has made an offer to become the largest shareholder in the airline by increasing its 9.9 percent stake through the purchases of the Logista and BBVA stakes.

This is the second time TPG has abandoned a bid for a national airline this year after it walked away as part of a Macquarie Bank-led consortium from an A$11.1 billion (€6.5 billion; $9.7 billion) bid for Australian airline Qantas.

BA holds a 9.95 percent stake in the Spanish airline which it intended to contribute to the bid alongside US buyout firm TPG and three domestic investment firms: Ibersuizas, Quercus Equity and Vista Capital.

To satisfy Spanish law, the latter three firms would have taken a 51 percent stake in any bid.

The consortium said in a statement: “As a consequence of the recent decisions taken by Iberia’s core shareholders, the consortium formed by British Airways, Ibersuizas, Quercus, TPG and Vista Capital, has come to the conclusion that it is not possible to pursue a potential takeover bid since the consensus and friendly terms that we considered essential for this project are no longer in place.”

A source said: “This was always going to be a friendly bid. Once BA decided not to exercise its rights the next step would have had to be a hostile takeover. Caja Madrid and the local government have essentially prevented global growth.”

He said fears held by the local bank that the consortium would have changed Iberia’s lucrative intercontinental routes to Latin America away from Madrid were unfounded. Iberia and BA have a route sharing agreement which the takeover would have strengthened, he said.

The consortium can table another bid under Spanish law as it had only tabled an indicative offer, he said. The source doubted this would happen.