Delta Sweetens Aeromexico Stake Offer as Trump Bruises Peso

  • Airlines cite currency movements as a reason for higher price
  • U.S. carrier would control 49% of Mexican partner after tender

Delta Air Lines Inc. boosted its offer for a stake in Grupo Aeromexico SAB to 53 pesos a share, raising the price after President Donald Trump’s election weakened the Mexican currency.

The increase from the previous level of 43.59 pesos is due to “interim exchange rate movements and other factors,” the two airlines said in a statement Monday. Delta started a cash tender offer through the Mexican stock exchange at the higher price as it followed through on previously announced plans to buy an additional 32 percent of Aeromexico.

The peso has tumbled 18 percent against the dollar since Delta announced plans in November 2015 to buy more of the Mexican airline’s shares. That was the second-biggest decline among major currencies. Investors dumped the peso over that period as Trump vowed to build a wall along the southern border and renegotiate the North American Free Trade Agreement.

Delta is seeking closer relationships with foreign partners, a push that Chief Executive Officer Ed Bastian says is crucial to boost sales. Following completion of the tender offer for Aeromexico shares, the Atlanta-based carrier would own or have options to buy as much as 49 percent of its Mexican counterpart.

Dollar Value

Delta’s offer was valued at about $2.60 a share when it was announced almost 15 months ago. The new price is the same level in dollar terms.

The change is “probably due to an internal agreement between the boards to fix a price in dollars with a reference in pesos,” Marco Montanez, an analyst at Vector Casa de Bolsa, said in a phone interview. “They had to update that price to reflect the current value in pesos.”

The two airlines declined to comment on any such agreement. Delta currently owns 4.2 percent of Aeromexico and holds options to buy another 12.8 percent.

The new price represents a 34 percent premium over Aeromexico’s closing level Friday. It’s an “attractive offer” that will probably win the approval of investors holding at least 25 percent of Aeromexico shares, which is required for the deal to be completed, said Corporativo GBM SAB analyst Mauricio Martinez. The transaction is also subject to antitrust approval in Mexico.

Aeromexico surged 16 percent to 45.80 pesos at 11:42 a.m. in Mexico City. Delta climbed 1.4 percent to $49.95.

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