Mexico to Sell Largest Airline to Consortium : Will Maintain Minority Interest in Mexicana

MEXICO CITY —  In its continuing push to privatize state enterprises, the Mexican government Tuesday announced a three-year plan to sell Mexicana de Aviacion, the nation’s largest airline, to a consortium of Mexican, U.S. and British investors.

Chase Manhattan Bank, British financier Sir James Goldsmith and investment fund DBL Americas are minority partners in the consortium, which initially will purchase 25% of Mexicana under a new corporation. The foreign investors will own 9.8% of the airline.

The government said the consortium initially will invest $140 million of fresh capital in the airline, bringing capitalization to $550 million. The group won the bid over six other potential buyers. The government expects investment of $3 billion in the company over the next 10 years.

Option to Buy

According to the agreement, the Mexican government will hold on to 40% of the company for the first year and phase out its participation in three years. The consortium will have the option to buy the government’s shares.

“As the government will be a minority partner, Mexicana now becomes a private business like any other,” said Jacques Rogozinski, chief adviser to Treasury Secretary Pedro Aspe.

The government had owned 58% of Mexicana. Under the agreement, minority stockholders may trade in their shares of Mexicana for equal shares of the new as-yet-unnamed company.

The new buyers are led by Grupo Xabre, an anonymous Mexican investment group, and Chase Manhattan Bank, which will invest $50 million each. DBL, in which Drexel Burnham Lambert is general partner, will invest $10 million; Goldsmith, $8.6 million; Mexican businessman Elias Sacal, $15 million, and financier Carlos Abedrop Davila, $4.6 million. Abedrop is owner of the FIMSA brokerage firm and the hotel chain Camino Real de Mexico.

Rogozinski said the Mexicana consortium will set up reservations, air cargo and maintenance companies in addition to purchasing shares in the airline.

‘Enormous Advantage

“This deal has an enormous advantage because it will allow Mexicana to grow. It is not just a deal to sell the company,” Rogozinski said. Rogozinski said Mexicana moved 8 million passengers last year on 80,000 national and international flights and that 40% of all commercial air travel between Mexico and the United States was on Mexicana. He said the company earned $136.3 million on revenue of $753.2 million.

Rogozinski said the government limited foreign participation to 49% of the new investment. The deal, nonetheless, is symbolic of President Carlos Salinas de Gortari’s new policy to encourage foreign investment and allow foreigners into areas such as the airlines that previously were off limits.

Over the past six years, the government has reversed its decades-old economic policies and sold hundreds of state-owned companies to reduce the state’s role in the economy and lower government expenditures.