Cerberus Capital Management, the US private equity group, has approached Alitalia about a bid that would allow Italy's troubled flag carrier to remain independent, in a move that could alter the race to control the airline, sources say.
The move by Cerberus comes one week after potential trade buyers including EasyJet and Lufthansa submitted binding offers for Alitalia, or parts of it, to the formal sale process being run by officials in Rome.
Since collapsing into administration in May, Alitalia has been managed by three government-appointed commissioners, and the government has extended a €900 million bridge loan to keep the company flying through September 2018.
Cerberus opted not to submit its own binding offer because it considered the terms of the public tender too restrictive.
But the New York-based buyout group has since told Alitalia it was still interested in buying the lossmaking airline if it could be comprehensively restructured, the people said. They added that Cerberus has been studying Alitalia for the past few months and held several conversations with the commissioners about its interest.
Cerberus has suggested that it would be willing to invest funds worth somewhere in the “low nine-digits”, or between €100m and €400m, to gain control of Alitalia.
Its plan also calls for the Italian government to retain a stake in the airline, while trade unions would benefit from some form of “profit sharing” in the Cerberus scheme.
Cerberus and Alitalia declined to comment.
Cerberus, which has a history of engineering difficult corporate turnrounds, restructured Air Canada more than a decade ago.
People briefed on the talks said Cerberus has argued to the commissioners and the company that it could make Alitalia “sustainable, competitive and independent” through a bid for the whole company.
“This is not to cherry pick certain assets, not to just buy planes or certain routes but to keep the business together as Italy’s national airline,” said one.
Cerberus has also offered to “step in” to get a “head start” on reorganising Alitalia for no fee even before making its investment, to take advantage of the broad powers the commissioners have to revamp the airline during the insolvency process, the people said.
Cerberus’ interest outside the formal bidding process is likely to be met with scepticism in Rome. “There are rules and they need to be respected,” said one Italian official, arguing that Cerberus’ bid could not be considered unless the formal auction was cancelled.
Another official said Cerberus would have to team up with an existing bidder to participate in the sale. In addition, the Italian government has so far ruled out maintaining an equity stake in Alitalia after the sale.
But Cerberus may benefit from the fact that the other strong offers on the table would make Alitalia the junior partner of another European airline.
Lufthansa, for instance, has said it wants to purchase only Alitalia’s global network traffic and European domestic point-to-point business. “If any of the other bids are accepted, it be the end of Alitalia as we know it. Effectively it would be a liquidation,” one person said.
Alitalia has delayed its consideration of the formal bids until April of next year after the disruption in the European airline industry brought on by the cancellations at Ryanair, the collapse of Monarch Airlines and the break-up of Air Berlin.
Between now and then, Italy is likely to hold a general election in which the fate of Alitalia could emerge as a sensitive subject.
Alitalia remains saddled by high overhead costs – including personnel as well as aircraft leasing contracts – and heavy competition from low-cost airlines on its short- and medium-range routes. The last investor to be burned ploughing money into Alitalia was Etihad of the UAE, which took a 49 per cent stake in the Italian carrier with great fanfare in 2014, only to see its money wiped out three years later.
Copyright The Financial Times Limited 2017