Sabas And Citigroup Compete For Aeromexico

October 16, 2007

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Mexico's Saba family increased its bid for money-losing Aeromexico to USD$170 million on Monday, 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.

Rothschild and Sons estimate the variable part of the offer 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.

The Sabas, one of Mexico's wealthiest families, said their offer expires on Tuesday, while the bid by the Citigroup group runs out on Wednesday.

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.

"We would list in the Mexican market, and potentially on international markets, through a public offering of at least 15 percent of Consorcio Aeromexico or its main subsidiary," Jose Luis 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.

A third bid by rival Mexicana was rejected last week by Mexico's anti-trust agency.