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Company Watch - Aeromexico.

Oct 22, 2007

A government agency handling the Aeromexico sale said it would accept the Citigroup and its Mexican partners offered USD$248.6 million offer and take the necessary steps to carry out the sale" if the US bank's bid is highest by the deadline. The Saba family, whose fortune from textiles, real estate and pharmaceuticals is calculated at USD$1.4 billion by Forbes magazine, has attacked the government's handling of the sale for a lack of transparency. The government agency handling the sale had said it would only consider, not necessarily accept, the Sabas' final bid even if it were higher. Moises Saba slammed the government's handling of the sale process, saying a level playing field was not being used. The government owns 62 percent of Aeromexico while the rest of the company is listed on the Mexican stock exchange. Oct 18, 2007

Aeromexico with a flurry of late offers ahead of a Wednesday Oct. 17 deadline for the money-losing airline. The Sabas, who made three separate offers in less than 20 minutes around the deadline, were slightly ahead with their last USD$249 million offer, at 2.72 pesos per share, to buy the debt-ridden airline from the government. Citigroup and its Mexican partners offered USD$248.6 million, or 2.7159 pesos per share for Aeromexico. It was not immediately clear if all the bids made it in before a 4 p.m. local time (2100 GMT) deadline. Mexico's government said earlier on Wednesday it would sell Aeromexico to Citigroup if its bid was the highest at the deadline. Aeromexico's shares closed 11.31 percent higher at 2.46 pesos on expectations that the bidding war, which began in August at USD$99 million, is not over. Oct 18, 2007

Citigroup and its partners have promised to invest USD$240 million in Aeromexico to turn it around should their offer be accepted. The Saba family has also said it would invest heavily to improve the airline. The Sabas started the bidding to buy 100 percent of Aeromexico in August with a USD$99 million offer. Citigroup and its partners recently bid USD$160 million for Aeromexico, as well as warrants reflecting the carrier's potential higher value within three years of the acquisition, when Citigroup would re-list a small part of the airline on the stock market. Oct 17, 2007

Despite the market's growth, Aeromexico, which has continued to charge traditional prices, has lost ground. Aeromexico and Mexicana, the country's two main airlines, were brought under government control after they went bankrupt in the mid-1990s. Early efforts to privatize the airlines were killed off by the industry-wide crisis that followed the September 11, 2001, attacks in the United States. Mexicana was finally sold to Mexican hotelier Posadas. Oct 17, 2007

The Mexican government said it would accept the Citigroup bid for Aeromexico unless a better offer came in by Wednesday Oct. 17 afternoon. The government owns 62 percent of Aeromexico and its holding company, Consorcio Aeromexico, while the rest of the company is listed on the Mexican stock exchange. An effort to sell the airline in 2005 failed to attract a suitable offer. The government said in a statement that its goal was to win the highest price possible for the airline, which lost USD$63 million in the second quarter, in the shortest time. Mexico's airline industry has taken off in recent years as low-cost airlines such as Interjet and Volaris offer flights at prices almost as low as bus fares. Oct 17, 2007

The Mexican government said on Tuesday Oct. 16 it was close to accepting a USD$206 million bid by Citigroup and its partners for Aeromexico, but a rival group promised a new offer in a heated bidding war for the money-losing airline. Mexico's Saba family and Citigroup raised their rival offers for Aeromexico earlier in the day, with the top bid coming from Citigroup at 2.2508 pesos per share. The Saba family promised to raise its bid on Wednesday after offering 1.90 pesos per share, or USD$174 million for Aeromexico, the country's largest carrier. Alternatively, Citigroup is offering USD$171 million in cash or 1.8686 pesos per share, plus warrants reflecting the future value of Aeromexico -- essentially a bet on whether the US bank and its Mexican partners can make the airline profitable. Oct 17, 2007

Aeromexico said in a statement its board considered both offers reasonable, and recommended investors carefully analyze the variable part of the Citigroup bid. If the offer by Citigroup and its partners is accepted, the new owners would de-list the carrier and later relaunch it on the stock market. The Sabas, one of Mexico's wealthiest families, said their offer expires on Oct. 16, while the bid by the Citigroup group runs out on Oct. 17. A third bid by rival Mexicana was rejected last week by Mexico's anti-trust agency. Oct 16, 2007

Mexico's Saba family increased its bid for money-losing Aeromexico to USD$170 million on Oct. 15, while rival Citigroup and its partners estimated their offer is worth at least USD$202 million. Citigroup and its Mexican partners sweetened their USD$160 million bid for Aeromexico last week by offering warrants reflecting the carrier's potential higher value within three years of acquisition. The group, which promises to inject USD$240 million into the airline, said its offer could be worth as much as USD$213 million, based on an independent estimate by N.M. Rothschild and Sons. The Sabas, who also said they would invest to rescue Aeromexico, had already raised their bid to USD$166 million. Oct 16, 2007

Rothschild and Sons estimate the variable part of the offer bid for money-losing Aeromexico by Citigroup and its partners is worth as much as USD$53 million, giving the offer a total value of up to 2.3401 pesos per share, Banamex, Citigroup's local unit, said in a news release. The government of Mexico owns 62 percent of Aeromexico and its holding company, Consorcio Aeromexico, while the rest of the company is listed on the Mexican stock exchange. Crippled by high labor costs and competition from nimble discount carriers, Aeromexico lost USD$63 million in the second quarter. Barraza, who represents Citigroup and its partners, told reporters earlier. The group forecast that Aeromexico could become profitable in 12 to 16 months after the buyout. Oct 16, 2007

Banamex, Citigroup's Mexican unit, said the warrants would trade on the stock market and pay out when Aeromexico is re-listed, within no more than three years. Banamex reiterated an earlier pledge by the group to quickly invest USD$240 million to improve Aeromexico, which would directly benefit warrant holders. The Mexican government is trying to sell its 62 percent stake in Aeromexico and its holding company, Consorcio Aeromexico. Aeromexico and Mexicana were brought under government control after they went bankrupt in the mid-1990s. Oct 15, 2007

Citigroup and its Mexican investment partners sweetened their offer on Oct. 11 for Aeromexico, the object of a bidding war, by offering warrants in additional to its original USD$160 million bid. The warrants offered by the investor group would pay out 10 percent of the increased value in Aeromexico from when it is acquired until it is eventually floated in a stock market offer. On Oct. 11, Mexico's competition watchdog rejected a USD$200 million bid by rival airline Mexicana for government-controlled Aeromexico, which has more than USD$1 billion in debt and is hamstrung by high labor costs and competition from discount carriers. Mexico's Saba family, one of the country's wealthiest, has offered USD$166 million. Oct 15, 2007

Mexicana said on Oct. 12 it plans to go to court to challenge the decision by the anti-trust commission to block its bid for Aeromexico. Mexico's airline industry has taken off in recent years as low-cost airlines such as Interjet and Volaris offer flights at prices almost as low as bus fares. Despite the market's growth, Aeromexico, which has continued to charge traditional prices and is hampered by above-average wage contracts, has lost ground. Oct 15, 2007

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Publication:AirGuide Business
Date:Oct 22, 2007
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