Cintra Stock Falls on Mexicana Sale

Mexican state-owned airline holding company Cintra vowed Wednesday to push ahead with the troubled privatization of its carriers despite weak interest and low bids that have sent its share price tumbling.

Cintra agreed late Tuesday to sell its Mexicana airline group to Mexican hotel chain Grupo Posadas for $165.5 million, plus the assumption of $294 million in debt and leasing deals worth $997 million.

The company rejected bids for Mexico’s other main airline, Aeromexico, calling them too low. Executives said the airline would be back on the block in January.

Chairman Andres Conesa said Cintra would again auction off Aeromexico or float the government’s majority stake on the stock market, or a combination of the two.

The Mexicana sale shocked many investors who were expecting a much higher price tag, and Cintra’s stock dropped 16.6% in early trading. It later clawed back some of those losses but ended 5% lower at 4.60 pesos.

The stock has slumped 30% in little over a week and is back at October 2004 levels, when Cintra first announced its privatization plan.

But Conesa said the Mexicana deal was a good one.

“I wouldn’t say they paid too much or that it went for less than it is worth. I’d call it a fair price,” he told Reuters.

He also said he had wanted to sell Aeromexico in the first attempt but insisted it was in good shape, was worth more than Mexicana and would be easy to sell in early 2006.

Aeromexico and Mexicana were both brought under government control after they went into bankruptcy during a deep economic crisis in the mid-1990s. The two carriers and their minor partners account for more than 60% of Mexico’s airline industry.

They were put up for sale this year and at first drew broad interest, but most potential bidders pulled out, including Icelandair and Spanish airline Iberia.

Only Grupo Posadas and Mexican investment firm Grupo Xtra stayed the course, although Conesa said Xtra’s offers for Aeromexico and Mexicana were below the minimum price Cintra had set for the sale.

Posadas also put in bids for the two carriers, but under the rules of the privatization, no firm was allowed to buy both.