TAP sale - "mission accomplished" - Neeleman beats Efromovich

Portugal’s Council of Ministers today decided that the bid from David Neeleman to buy 61% of TAP has more merit than the one from Germán Efromovich.

Hence, the government will sell the taxpayers’ 61% in TAP SGPS SA to David Neeleman’s group – Gateway rather than to Efromovich's Avianca Holdings.

A statement from Secretary of State from Transport Sérgio Monteiro outlined the deal, saying that Neeleman’s bid had “greater merit,” especially in terms of its contribution to strengthen TAP’s financial capacity and it “better responded to short-term challenges faced by TAP.”

The new owner of TAP has guaranteed to base the airline’s management in Portugal for ten years, to keep the Lisbon hub for at least 30 years, and to maintain the often loss making ‘strategic routes’ to Lusofile countries for ten years.

Neeleman was joined in the Gateway bid at the 11th hour by Humberto Pedrosa, owner of transport company Barraqueiro, to add a Portuguese element to the bid and to use Pedrosa’s undoubted knowledge of transport regulation, his contacts and awareness of the laws encircling union negotiation practices, his familiarity with the labyrinthine corridors of power in Lisbon, his money, creditworthiness and the fact that he is European as at least 50% of the capital of EU registered airlines must belong to EU nationals. 

Barraqueiro Transportes SA, owner of Frota Azul coaches and other transport businesses in Portugal, was a late entrant to the bidding and joined up with Neeleman’s Gateway bid vehicle.

Barraqueiro’s Humberto Pedrosa said as late as May 14th that TAP "is a subject that interests us," which gave little away.

The Gateway bid all-in-all is worth around €500 million but there are many variables.

From the treasury’s point of view, Gateway will pay just €10 million for the shares, but the main burden of €1.2 billion of debt hopefully soon can be removed from the government’s ledger as Neeleman and Pedrosa work to reduce debt in the troubled airline. The taxpayer still owns 35% of TAP which may be worth real money one day.

Monteiro added that Gateway’s bid included guarantees on "job security" and the new management team will keep all the current agreements and understandings that have been reached with the workers, including the one signed in December 2014 to avoid the strike between Christmas and the New Year.

The TAP sale agreement forbids the new owners to execute collective redundancies for as long as the taxpayer owns shares in the company, or for a period of 30 months.

The Secretary of State assured the press today that any rules that are broken will trigger "daily fines, the cancellation of the purchase option for the remaining capital of the company and the right for the government to reverse the privatisation without being obliged to compensate the buyer.

Gateway will inject €354 million of capital into TAP, comfortably over the €300 minimum set by the government, which with 54 new aircraft promised, amounts to a value of around €500 million for the business.

As for the current TAP president Fernando Pinto, he considered that both bids were viable but said that the winner meets the company’s short-term challenges faster.

Sérgio Monteiro admitted that the immediate money from selling the shares was not exactly impressive but if the job is done right, the government’s remaining shareholding will be worth many times its current value.

There has been no union response to the deal as yet, nor has there been a response from the Socialist Party which has pledged to reverse the privatisation should it go ahead, which is just has.

"We have a very clear conscience, we did what was best for TAP and for the national economy, for Portugal," said Minsietr for the Economy Pires de Lima, adding that "the mission accomplished feeling is the feeling that we can enjoy this evening."

Others were not so chipper as Mariana Mortágua  from the Left Bloc criticised the lack of transparency in the TAP privatization process and said her party will try and stop the sale.

"I'm not here to comment on the privatization of TAP but on delivery of TAP for a nominal fee, €10 million. It takes chutzpah to make this decision and present it as a benefit to the country," said Mortágua in response to comments by Prime Minister Passos Coelho.

After the Council of Ministers meeting this morning and the subsequent announcement of the winner, the prime minister said the government has approved this process with "great courage."

Mortágua said that parliament does not know on what basis the carrier was sold and that her party would "every means to halt the privatization" of the carrier as the sale was “harmful to the interests of the country."

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