MercoPress. South Atlantic News Agency

BA in group seeking to buy Spain's Iberia for 3.4bn euros

British Airways is expected to announce on Tuesday that it is joining a consortium led by Texas Pacific Group, the US private equity firm, to explore a takeover bid for Spain's Iberia airline.

TPG has been the frontrunner in talks with BA to lead the bid. It is understood that the airline has rejected enlarging the consortium to include Apax, the UK private equity group, which has been considering a rival offer. A takeover bid for Iberia, the fourth biggest airline in Europe, is still not guaranteed but agreement on the make-up of a consortium would pave the way for an urgent request to Iberia to conduct due diligence in preparation for launching one. The initiative confirms the growing interest of private equity groups in the airline industry and will accelerate the restructuring of the European aviation sector. BA has publicly ruled out making an independent bid for Iberia and has also said that it will not commit any further capital as part of the consortium bid. It has taken a cautious approach to the consolidation of the European airline industry, where its bigger rivals, Air France and Lufthansa, have already stolen a march with their takeovers, respectively, of KLM, the Dutch national carrier, and Swiss. Participation in a winning consortium bid would keep the door open for BA to make a more ambitious move in subsequent years, when it has completed its own restructuring. The TPG-BA grouping will include three Spanish partners, which will together hold at least 51 per cent of the consortium in order to preserve Iberia's majority Spanish ownership in an eventual takeover â€" a necessary condition to avoid jeopardising its international traffic rights, most importantly to Latin America. The Spanish partners will include Vista Capital â€" the Spanish private equity group that belongs to Santander â€" Ibersuizas and Quercus. Ibersuizas, owned by Jesús Salazar, Spain's olive oil king, and Fernando Martín, a builder, has taken big stakes in FCC, the construction and services group controlled by Esther Koplowitz. Quercus already owns a stake in Clickair, Iberia's affiliate low-cost carrier. TPG was a member of a consortium that unsuccessfully bid for Qantas, the Australian airline. It is also part of one of three groups bidding for Alitalia, the lossmaking Italian airline. BA has close ties with Iberia. It holds a 10 per cent stake, has a right of first refusal on a further 26.5 per cent held by Spanish core shareholders and has two members on the Iberia board. TPG has appointed JPMorgan as its lead financial adviser, while Iberia has engaged Goldman Sachs and Morgan Stanley. BA is being advised by UBS. Iberia has been the subject of rising takeover speculation since it announced that TPG had requested access to its books with a view to a possible offer for the airline at €3.60 a share. The Iberia share price closed at €3.92 on Monday night, up 0.51 per cent.