01/08/09, 01:00:06 UTC

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UPDATE 2-Mexico's Saba to boost bid for airline Aeromexico

reuters.com

MEXICO CITY - Mexican businessman Moises Saba said on Monday he plans to sweeten his bid for money- losing airline Aeromexico after rivals topped his earlier offer.

Last week, Saba extended his $100 million offer for Aeromexico (AMEXICOA.MX: Quote, Profile, Research) to Sept. 30 after another group, including the Mexican unit of Citigroup Inc (C.N: Quote, Profile, Research) and major shareholders of brewing giant Modelo (GMODELOC.MX: Quote, Profile, Research), offered $150 million.

Asked how much he was willing to pay, Saba said: "We don't know. Everything depends on how much the competition is willing to throw in."

The Mexican government is trying to sell its 62 percent stake in Aeromexico and its holding company, Consorcio Aeromexico, which lost $63 million in the second quarter, with sales sliding 11 percent because of tough competition from low- cost carriers.

A third bid for Aeromexico, which has been crippled by high labor costs and debts totaling $1 billion, is in the works, according to a source at Mexico's antitrust body.

Aeromexico shares were down 1.10 percent at 1.80 pesos, but still above the bids that have been made. Saba made an offer of 1.1 pesos per share and the other group of investors said they were willing to pay 1.6842 pesos per share for Aeromexico.

Saba, whose family is one of Mexico's wealthiest with interests in real estate, textiles and pharmaceuticals, said that, for the moment, he was not looking to link up with any other partners to make a new bid for Aeromexico.

"For the moment no (partners), we are going to use our own money," Saba told Reuters in a brief interview.

The government, which was originally planning to sell its shares in Aeromexico on the stock market, has not said when it will make a decision on the bids.

RIVAL BID

The rival investor group includes the Canales Clariond clan, flush with cash after selling steel company IMSA; the Aramburuzabala family, shareholders of Modelo; and Ricardo Martin Bringas, whose family owns retailer Soriana (SORIANAB.MX: Quote, Profile, Research).

Some people are surprised that any bids have emerged for Aeromexico and whoever ends up owning Aeromexico will have to halt its dwindling passenger share.

According to latest figures, Aeromexico transported 21 percent of all passengers on flights in Mexico in 2006, down from 30 percent five years ago.

But others say the cache of having your own airline is enough in itself.

Hoteliers Grupo Posadas, which bought No. 2 airline Mexicana for just over $150 million two years ago, said two weeks ago it was not going to bid to buy Aeromexico.

But Grupo Mexicana de Aviacion, which runs Mexicana, has told Mexico's antitrust body of its intention to bid for Aeromexico.

Aeromexico and Mexicana were brought under government control after they went bankrupt in the mid-1990s.

Some analysts say the way forward is to declare bankruptcy, force the airline's union to make concessions, and relaunch the airline as a low-cost carrier like Volaris or Interjet.

Saba has said he wants to slash costs by $200 million per year, boost sales 10 percent and focus on high-end service to pull it out of trouble, rather than go down the route of transforming Aeromexico into a low-cost carrier.

 Printable Version  | published Sep 25, 2007