British Airways to block Iberia

British Airways, the third largest airline in Europe, is set to block a full-blown takeover of Spain’s Iberia by teaming up with a number of private equity firms.

“British Airways is considering how to use its 10% holding in Iberia following the [Spanish carrier’s] announcement that it has received a bid approach,” the company said in a statement on April 23.

“As part of this process, the airline has approached a number of private equity companies about making a consortium offer for Iberia.

“Any consortium bid would not involve further capital investment by British Airways. As well as a private equity partner, this consortium is likely to include one or more Spanish partners,” BA said.

Towards the end of March, US private equity house Texas Pacific Group, advised by JPMorgan, made a €3.4bn approach for up to 49% of Iberia at €3.60 a share.

But Iberia’s board, led by chairman and chief executive officer Fernando Conte Garcia, demanded that TPG name its partners on the deal before talks could begin.

Now, it looks as though BA wants to team up not only with TPG but also UK-based private equity fund Apax, which owns 20.9% of Spain’s low-cost carrier Vueling Airlines.

Apax could find value in pushing for a merger between Vueling and Iberia’s own budget airliner, Clickair.

Speculation about BA’s Spanish partners centres on infrastructure and BAA airport operator Ferrovial as well as Acciona and Spanish bank Caja Madrid, which already owns 9.6% of Iberia.

They would be instrumental to the success of any BA-led bid to keep Iberia Spanish, and thus ensure the Spanish airline’s lucrative Latin American routes.

Although British Airways, which is being advised by UBS, has the right of first refusal on almost 30% of Iberia’s stock held by Spanish investors, it still may end up selling its existing 10% stake. All options remain on the table.