AM001
Posts: 149
Joined: Thu Jan 29, 2004 1:44 pm

AVolar & AeroMexico?

Wed Jan 31, 2007 9:07 am

Greetings, fellow anetters:

Just read this at Reforma newspaper (yesterday, 01/29 edition):

"Y CON LA novedad de que recién apareció un nuevo postor por Aeroméxico que dirige Andrés Conesa. Se trata de Jorge Nehme Name, quien encabeza Avola (...). Con 10 aviones y 32 destinos, no ha dejado de crecer. En su expectativa está llegar a 2 millones de pasajeros para este año (...). Se conoce que podría realizar una oferta hostil, más allá de que el IPAB y los socios de Aeroméxico retomarían una subasta convencional para el primer trimestre. Nehme ha tenido algunos contactos con los sindicatos para redondear su diagnóstico. Así que considérelo, ya que por lo que nos platican, va muy en serio."

This is Alberto Aguilar's editorial, which in aeronautical matters is as good as the weatherman... no offense...

Some snippets:

- Avolar, headed by Jorge Nehme Name, with 10 planes and 32 destinations has not stopped growing. It expects to reach 2 million pax this year.
- It has been revealed that it may attempt a hostile takeover on AM, beyond IPAB's (the Mexican Government organism that currently controls AM) and other AM shareholders plans' to hold a conventional bid process during 1Q of 2007.
- Nehme has contacted the unions to make a correct assessment [of the carrier, I guess].
- This is to be considered, as it seems, a very serious attempt.

My questions:

- How can a hostile takeover bid can be performed under the current stock holding circumstances in AM? Is it possible at all?
- Does A5 or Mr. Nehme have the power, structure, and capacity to take over such a different organization, in terms of size and product?
- Any insider info on either carrier?
- Overall, what do u all think? possible at all? probable?

Anyhow, interesting news, I guess.

Regards to all, and my best for this 2007,

AM001
"Je vole car cela libere mon esprit de la tyrannie des choses insignifiantes" - St. Exupery
 
EddieDude
Posts: 6302
Joined: Fri Nov 14, 2003 10:19 am

RE: AVolar & AeroMexico?

Wed Jan 31, 2007 9:48 am

Quoting Am001 (Thread starter):
How can a hostile takeover bid can be performed under the current stock holding circumstances in AM? Is it possible at all?

Doubtful. I am not familiar with the current capital structure of AM, but as of late June, 2006 (see AM's annual report for 2005 at the Mexican Stock Exchange's site), the IPAB (Mexico's deposit insurance agency) owned 46.45% of the shares, Nacional Financiera SNC (on behalf of the Ministry of Finance and Public Credit) owned 10.16%, and Nacional Financiera SNC (for itself and on behalf of third parties) owned 7.08%. The float, then, was therefore 36.31% only. As you can see, the Federal Government owned one way or another more than 56% of the shares of AM as of June 2006.

Hostile takeovers in Mexico are D.O.A. since companies almost never float significant percentages of their capital stock in the stock exchange (remember how this U.S. fund that owned Iusacell bonds launched a hostile offer for Iusacell and lost big time even though his offer was twice as much as what Salinas Pliego offered to Verizon and Vodafone). Asur is one of the few companies I can think of that have big floats and that could theoretically be acquired via a hostile takeover. And most likely they have anti-takeover provisions in their by-laws... our brand-new Securities Market Act authorizes that.

The only way a non-solicited offer for AM could prosper is that it is good enough to convince the Federal Government to sell (i.e., if the offer values AM at a higher price than its trading price and than the target price that AM's investment bankers determine). Frankly, I don't think anybody in his right mind would offer such an amount for money for AM... the fact that it has not been sold yet after one attempt and many changes of mind should explain why.

Quoting Am001 (Thread starter):
Overall, what do u all think? possible at all? probable?

Nah, just a lot of noise... unless Nehme is already in talks with AM and the IPAB, in which case the offer will have nothing of hostile or non-solicited.
Next flights: MEX-LAX AM 738, LAX-PVG DL 77L, SHA-PEK CA 789, PEK-PVG CA A332, PVG-ORD MU 77W, ORD-MEX AM 738
 
pzurita1
Posts: 1199
Joined: Tue Sep 24, 2002 11:21 am

RE: AVolar & AeroMexico?

Wed Jan 31, 2007 11:10 am

Similar speculations arose exactly one year ago. At that time, potential buyer was Aviacsa. However, seems that union neglected this dream of Morales Meiga.

Anyway, this is good chance to ask for more details about A5. How are they doing overall. Since they are the only airline not flying to MTY they are completely unknow here.

PZ
Next flight: IAH-DBX-MRU-ANT
 
navega
Posts: 467
Joined: Tue Nov 02, 1999 10:58 pm

RE: AVolar & AeroMexico?

Wed Jan 31, 2007 11:57 am

Question,

Could Mexicana technically buy Aeromexico. Now before the Die Hard Aeromexico and Mexicana passionate soap opera people get all histerical,
I am asking this as a very legitimate question.

Not intendet to offend anyone.

Just curious.
 
rojo
Posts: 2266
Joined: Tue Sep 05, 2000 6:08 am

RE: AVolar & AeroMexico?

Wed Jan 31, 2007 12:19 pm

Quoting NAVEGA (Reply 3):
Could Mexicana technically buy Aeromexico. Now before the Die Hard Aeromexico and Mexicana passionate soap opera people get all histerical,
I am asking this as a very legitimate question.

Technically, NO. The CFC (Comision Federal de Competencia) already ruled against AM and MX being sold together, therefore, I don't think MX could get approval from the CFC if they were to submit a bid...
 
juventus
Posts: 2017
Joined: Tue Dec 07, 2004 11:12 pm

RE: AVolar & AeroMexico?

Wed Jan 31, 2007 12:21 pm

I don't see this happening. But this leads me to believe that at least Avolar is doing well financially.
 
AM001
Posts: 149
Joined: Thu Jan 29, 2004 1:44 pm

RE: AVolar & AeroMexico?

Thu Feb 01, 2007 12:58 am

Well, here we go again:

Reforma, 01/31, at "Marcapasos" editorial:

"Desde Estados Unidos, Jorge Nehme, de Avolar, ya confirmó que va con todo por Aeroméxico y no lo hará solo, sino con un grupo de empresarios mexicanos.

"Andrés Conesa, director del consejo de administración de Aeroméxico, ya ha dicho que existen tres formas de vender el consorcio: a través de una oferta directa, vía licitación, o a través de la colocación de todas las acciones que tiene el Gobierno federal y bancos.

"Y Nehme está más que apuntado. (...)."

Which can be roughly translated as:

From the US, Jorge Nehme from Avolar confirmed he's and a group of Mexican businessmen are "all in" for Aeromexico.

Andres Conesa, Aeromexico's chairman of the board, has said that there are three ways to sell the consortium: direct offering [!], bid process or through public offering of stock [I guess via the BMV].

---

So, this "direct offering" is possible? there is the window of opportunity for Mr. Nehme.

Is it finally time??? [Add skeptic chuckle here].

AM001
"Je vole car cela libere mon esprit de la tyrannie des choses insignifiantes" - St. Exupery
 
EddieDude
Posts: 6302
Joined: Fri Nov 14, 2003 10:19 am

RE: AVolar & AeroMexico?

Thu Feb 01, 2007 2:20 am

Quoting NAVEGA (Reply 3):
Could Mexicana technically buy Aeromexico. Now before the Die Hard Aeromexico and Mexicana passionate soap opera people get all histerical,



Quoting Rojo (Reply 4):
Technically, NO. The CFC (Comision Federal de Competencia) already ruled against AM and MX being sold together,

No need to apologize NAVEGA, it is indeed a very legitimate question. Rojo is right as to the antecedent, but I guess that one could argue this time that the circumstances have changed. The main parameter that antitrust watchdogs consider for purposes of determining the degree of concentration of a market is the Herfindahl-Hirschman Index and the HHI now is very different from the HHI at the time of the CFC's resolution. A Volar, Volaris, Interjet, Viva Aerobus and Alma did not exist back then; their current market share totally changes the HHI of the domestic aviation market. Of course AM and MX are still the top two airlines, and a tie up would pose serious antitrust concerns (i.e., the transaction would maybe fail again the HHI test), but a stubborn group of lobbysts, economists and legal advisors could maybe convince the CFC to authorize a tie-up, offering a number of conditions aimed at leveling the field with the rest of the industry for domestic competition (i.e., the acquisition of AM's international operations by MX and the divestiture of the domestic operations of AM to the likes of 6A and the LCC's or to an altogether new investor could be a very interesting proposition). Speaking of a consolidation of international routes of Mexico's two main carriers, I think the wise utilization of the "national champions" theory (so much loved in Europe) could also ring some bells within the CFC... there is no doubt that a carrier with AM and MX's international routes would be in a better position to compete with U.S. and European carriers and that is exactly what antitrust laws and regulators must promote.

Anyhow, that is just speculation... MX has its hands full right now.

Quoting Am001 (Reply 6):
Well, here we go again:

Reforma, 01/31, at "Marcapasos" editorial:

I read it. You beat me to posting it! Seems that Nehme is serious about it, but I am not sure if there have been official contacts with the IPAB and the Ministry of Finance. I agree that a direct offer would make sense in this case, but the IPAB and the Ministry of Finance won't take it if the valuation is lower than what their investment bankers have come up with... after all, the IPAB has a mandate to recoup as much as it can.

Quoting Juventus (Reply 5):
this leads me to believe that at least Avolar is doing well financially.

Well, an airline so young cannot be in the black... I don't know when they expect to break-even but I would imagine that the earliest would be 2008. I guess there is a lot of optimism on Nehme's side about AM's prospects and a lot of confidence in his team's ability to make AM profitable... I'd expect the proceeds to close this transaction would come mainly from capital commitments from Nehme and other investors (note in AM001's transcript that other investors have been lined up), plus debt (not sure if that could be credit facilities or if they are planning already to issue debt securities to the public or to qualified investors locally or abroad).
Next flights: MEX-LAX AM 738, LAX-PVG DL 77L, SHA-PEK CA 789, PEK-PVG CA A332, PVG-ORD MU 77W, ORD-MEX AM 738

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