From The Times
April 15, 2008
Sir Richard Branson in talks with Dubai International Capital over bmi takeover
David Robertson, Business Correspondent
Sir Richard Branson has held talks with Dubai International Capital (DIC), the $12 billion sovereign wealth fund, about financing a possible takeover bid for bmi, The Times has learnt.
The billionaire entrepreneur is understood to have joined senior executives from Virgin Group when they visited Dubai recently to discuss potential deals in the health, mobile phone and airline sectors.
Among the proposals discussed by Sir Richard and DIC was the possibility of a joint £750 million bid for bmi, the former British Midland.
Sir Michael Bishop, who owns 50 per cent plus one share in bmi, is widely expected to put his stake up for sale this year, although he insists that he is under no pressure to do so.
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Lufthansa, the German national carrier, is a 30 per cent shareholder in bmi and has an option to buy out Sir Michael.
However, if Lufthansa passes on Sir Michael's stake, then Virgin Atlantic will try to take control of the airline.
Alternatively, there are rumours that Lufthansa and Virgin may co-operate in a deal to buy bmi and create a European super-carrier.
Virgin will face competition from British Airways, which revealed last year that it would be interested in acquiring bmi.
Virgin and DIC were partners last year in the failed bid for the struggling Northern Rock bank. The recent meetings are thought to have been preliminary discussions on how the two groups could co-operate in the future.
Other than bmi, the possible joint ventures could include developing a Middle Eastern Virgin mobile operation and expanding the presence of Virgin Active health clubs in Dubai.
If Sir Michael does decide to auction his stake in bmi, he will be in a strong negotiating position.
The value of the airline's slots at Heathrow have risen dramatically since the introduction of the "open skies" agreement between Europe and the United States.
Airlines such as Continental and Delta are desperate to get into Heathrow but cannot do so. Control of bmi's slots, therefore, would be a huge boost for any carrier.
Virgin is also interested in bmi because it would give it a short and medium-haul feeder network. This would bring passengers from across Europe to its base at Heathrow, allowing them to transfer to long-haul Virgin flights.
A spokesman for Sir Michael said: “No decision has been made and no decision needs to be made, as bmi's shareholders can just carry on as they are.”
Virgin declined to comment.
British Airways is thought to be keen to buy bmi to consolidate its leading position at Heathrow, but such a bid would generate competition concerns.
BA may also struggle to finance a bid for bmi should Sir Michael choose to auction his stake.
The airline has issued a profit warning for this year and some analysts have predicted that its profits could more than halve to less than £400 million.
The combination of Terminal 5 costs and the financing of a new fleet of aircraft could put bmi out of its reach.