US buyout firm TPG is reportedly considering a €3.4 billion ($4.5 billion) bid for Spanish airline Iberia.
Bloomberg reports that TPG is considering a €3.60 per share bid, which would be 10 percent below Iberia’s closing price today of €4.00. Shares were up 3 per cent today after news emerged of the potential bid.
Analysts have suggested that TPG is likely to submit a deliberately low bid to take into account the almost certain counter-offer from British Airways, which owns 10 per cent of shares in Iberia and has first refusal on another 30 percent.
Other trade bidders could also emerge, with the likes of Lufthansa and Air France all tipped to show interest in the Spanish airline.
Iberia has suffered from stiff competition in domestic and European markets recently, but it has highly profitable long-haul links to Latin America. The airline’s share price has gone up 44 percent this year after the US/EU ’open skies accord’, which will allow EU airlines to fly to the US from any airport in Europe from March 2008.
TPG is a highly experienced investor in the airline industry. It engineered the much-lauded turnaround of Continental Airlines, which increased the airline’s value by ten times in two years, has investments in America West Airlines and Tiger Airways, and is currently on a shortlist of five airlines bidding for Italian airline Alitalia.
It is also part of a consortium trying to buy Australian airline Qantas, although the bid looks increasingly likely to fail. Balanced Equity Management, one of the airline’s biggest shareholders has already publicly opposed the deal, and UBS, another major shareholder, may well follow suit.
Morgan Stanley and Goldman Sachs are advising Iberia on takeover approaches.