Virgin and BA snub Lufthansa over sale of its stake in bmi

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The Independent Online

Virgin Atlantic and British Airways have told Lufthansa they are not interested in buying the German airline's minority stake in bmi British Midland.

Virgin Atlantic and British Airways have told Lufthansa they are not interested in buying the German airline's minority stake in bmi British Midland.

Lufthansa is seeking to offload its stake of just under 30 per cent in bmi to avoid being obliged to buy the rest of the airline from Sir Michael Bishop if the bmi chairman decides to exercise a put option at the end of this year.

The refusal of BA and Virgin, the two most obvious buyers of Lufthansa's stake, to show any interest, leaves the German flag carrier in a difficult position and strengthens the hand of Sir Michael.

The put option enables him to sell his 50 per cent plus one share interest in bmi to Lufthansa on the same terms it bought into the airline in 1999. This would value Sir Michael's stake at £229m. Lufthansa bought an initial shareholding of 20 per cent for £91.4m six years ago and subsequently raised its shareholding to just under 30 per cent.

Sir Michael declined to comment yesterday but sources close to the bmi chairman said it would be impossible for Lufthansa to dispose of its stake without his approval.

"Lufthansa is wriggling on the end of a hook and would like to get out of the put option but Michael has the ability to decide whether any purchaser of the stake is acceptable," the source said. "Nobody can move an inch unless they get Michael's support and Michael is not inclined to give that support because of the way Lufthansa has gone about this."

It is also understood that Sir Michael is in no hurry to cash in when the put option becomes exercisable because an eventual open skies deal between the US and Europe opening up Heathrow to any carrier would make bmi's slots at the airport much more valuable.

Although Virgin is not interested in buying the Lufthansa stake, a spokesman said it was still keen to agree a merger with bmi. A Lufthansa spokesman said it was "pure speculation" that it was trying to sell its stake.

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