TPG, the US buyout firm that has invested in a number of airlines, may decide not to proceed with a €3.4 billion bid for Spanish carrier Iberia, after reportedly falling out with its bid partner British Airways.
British Airways, which is already a large shareholder in Iberia, wants TPG to join forces with rival buyout group Apax Partners, according to media reports. BA reportedly believes that if the two firms both join its consortium, it will eliminate any serious competition to the bid – whereas if they bid against each other and BA backs the wrong one, its operational influence could be threatened.
However, TPG is thought to be against the idea of teaming up with Apax. Since the Spanish government must by law hold a majority stake in Iberia, and BA and other shareholders retaining a sizeable holding, TPG is not keen to dilute its potential stake even further by bringing Apax on board.
TPG is already operating with two Spanish buyout partners, in an attempt to allay political fears: Vista Capital, which is owned by Santander Bank, and Ibersuizas.
BA currently owns a ten percent stake in Iberia, giving it two seats on the board, and has a first refusal on a further 26.5 percent. The two carriers already have a strategic partnership, operating a profit-sharing joint venture on the routes between UK and Spain. However, since BA is going through a restructuring of its own, it is unwilling to make an independent bid and has already ruled out committing further capital to the consortium offer.
Iberia is restructuring its operations in the face of increased competition from low-cost carriers, and last week reported improved results. Net profit in the first quarter was €12.2 million, up from a loss of €45.0 million last year.
However, in better news for TPG – which has also seen a bid for Australian airline Qantas collapse in recent weeks – the Italian government revealed that its consortium was one of the three shortlisted groups in the final round of bidding for Alitalia, the struggling Italian carrier.