Portugal Shelves TAP Airline Sale After Rejecting Brazil Bid

Portugal’s government shelved the sale of state-owned airline TAP SGPS SA after rejecting the sole offer from Brazilian investor German Efromovich’s Synergy Group.

Synergy, which controls the Avianca airline brands, made the only binding bid for TAP by a Dec. 7 deadline after Portugal opted for a disposal following the country’s bailout by the International Monetary Fund and European Union last year.

“It wasn’t possible to ensure in an adequate way the financial means that would guarantee the price of the deal, the capital increase and the refinancing of the company,” Maria Luis Albuquerque, Portugal’s secretary of state for treasury and finance, said today after a weekly cabinet meeting.

Cash-strapped Portugal has already sold stakes in utility company EDP-Energias de Portugal SA and energy-grid operator REN-Redes Energeticas Nacionais, and is auctioning airport operator ANA-Aeroportos de Portugal SA. A sale to Efromovich’s Synergy would have been the first instance of a company in an ex-colony buying the flag carrier of its one-time ruler.

Portugal remains pledged to sell TAP under the right conditions, “ideally” beginning next year, Albuquerque said. While as many as 13 parties initially sought information during the current auction, only Efromovich had pursued his interest.

Capital Injection

A sale to Synergy would have resulted in a 35 million-euro ($46 million) gain for the state. The group would also have taken on TAP’s debt and carried out capital increases of 166 million euros and 150 million euros, the minister said.

TAP had been expected to fetch a maximum 500 million euros, according to analyst Donal O’Neill at Goodbody Stockbrokers in Dublin. The company lost 76.8 million euros in 2011, when it carried 9.75 million people, with debts of 1.23 billion euros.

Founded in 1945 with two 21-seat Douglas DC-3s, Lisbon-based TAP’s initial routes included a 12-stop service to Angola and Mozambique. The carrier went private in 1953, with the state retaining a majority stake, before being renationalized in 1975 following the fall of the authoritarian Estado Novo regime.

Swissair Group agreed to buy a stake in 1999, then backed out in 2001, later declaring bankruptcy.

TAP’s chief attraction is its 74 weekly flights between Lisbon and Brazil, with its fast-growing economy, though the carrier also offers the same number of services to Africa and operates 46 routes within Europe. Barclays Plc, Banco Espirito Santo SA, Citigroup Inc. and Credit Suisse Group AG are advising on the disposal and that of ANA.

The government still plans to announce a decision on the sale of ANA in next week’s cabinet meeting, Albuquerque said.

European Union rules limiting outside ownership of the bloc’s airlines to 49 percent meant Efromovich had sought Polish citizenship based on his parents’ country of origin to qualify for a larger purchase. His status was confirmed on Nov. 30, said Ivetta Bialy, a spokeswoman for Poland’s Mazowsze province.

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