|
Iberia take-off struggles
|
 |
March 30, 2001: 8:35 a.m. ET
Institutional investors take up just 86% of shares on offer, public more keen
|
LONDON (CNN) - Spanish airline Iberia may have to discount its share offering as institutional investors baulk at the asking price.
The Spanish government, through its state holding company Sepi, is trying to sell its remaining 54 percent stake in Spanish flag-carrier, but analysts are concerned about unresolved labour disputes and an economic downturn.
Sepi is due to announce a final price for the offer on Sunday before the shares hit the stock market on Tuesday.
Analysts expect the government to cut the price of its initial public offering, which currently values the carrier at between  1.56 billion ($1.4 billion) and 1.8 billion based on a share price range of 1.71 and 1.97
The government took the decision to cut the price for shares at the top end of the range by 7.9 percent to 1.97 earlier this week. That strategy has still failed to pull in investors.
In this scenario "you would expect the government to lower the price to mop up the remaining stock," Chris Avery, an analyst at J.P. Morgan, told CNN.
"Sepi should consider pricing Iberia at about 1.3 billion and maybe a lot less," said one airline analyst speaking on the condition of anonymity.
"When selling anything you need all your employees pulling in the same direction. Not resolving the concerns of your pilots – the most important people at an airline – leaves you disadvantaged," the analyst added.
Another analyst, Martin Borghetto, told CNN that the IPO market was particularly difficult at the present moment.
"Investors are concerned that an U.S. (economic) slowdown and an expected European slowdown would not bode well for earnings," he said.
While Iberia is more exposed to the Latin American market than the revenue-generating transatlantic routes, which would come under pressure from a U.S.-led slowdown, the net effect would "damage sentiment towards the sector," J.P. Morgan's Avery said.
Sepi said on Friday that institutional investors requested shares equivalent to just 86 percent - worth about 263 million - of the number of shares available.
Retail investors, or the general public, have asked for shares worth 768.7 million, Sepi said in a note to stock market regulators. That was equivalent to 1.5 times the number of shares available to individual investors.
Reuters said Sepi is under pressure from Banco Santander Central Hispano and U.S. investment bank Merrill Lynch, who are arranging the IPO, to cut the price further.
Iberia was worth 2.8 billion in 1999, when a group of investors including British Airways, American Airlines and Banco Bilbao Vizcaya Argentaria bought a 40 percent stake.
Iberia's valuation also include an 18 percent stake in travel reservation company Amadeus Global Travel. 
|
|
|
|
|
 |
|
