UPDATE 2-Spain loses influence in IAG as Bankia sells stake

Thu Jun 27, 2013 9:16am EDT

* Bankia sells 12 pct IAG stake to investors at 3 pct discount

* Sale raises 675 mln euros, capital gain 167 mln euros

* Spain loses IAG board seat in midst of Iberia restructuring

* Stake sale part of Bankia's recovery plan

By Clare Kane and Tracy Rucinski

MADRID, June 27 (Reuters) - Spain has lost its direct influence in International Airlines Group in the midst of its controversial restructuring, after nationalised lender Bankia sold its stake in the airline company for 675 million euros ($877 million).

Bankia, bailed out to the tune of 24 billion euros by the state last year, sold the 12 percent stake on Thursday as part of a recovery plan agreed with the government and the European Union.

International Airlines Group (IAG) was formed in 2011 by the merger of British Airways and Spain's Iberia.

Losses at the Spanish airline, however, have led IAG to launch a restructuring at Iberia which includes thousands of lay-offs and sparked strike action earlier this year in a country where over a quarter of the workforce are jobless.

"A forced sale like this one tends to have dangerous implications. The (Spanish) government should be able to have a say in its only national airline, which has a major role in the economy," said Jose Maria Marin, a professor at the state-run National University of Distance Education (UNED).

As a result of the stake sale, the Spanish government - through Bankia - will lose a seat on IAG's board. However, certain safeguards for Iberia's business that were put in place at the time of the merger - such as the routes it can fly - remain in place until 2016.

"Spain's influence in IAG is reducing," said Cantor Fitzgerald analyst Robin Byde. "Iberia now accounts for around 26 percent of IAG's capacity ... maybe those who said the merger was more of a BA takeover were right."

The buyers of Bankia's stake are unknown, though financial sources told Reuters that bookrunner Merrill Lynch had sold the 224 million shares to a wide range of investors.

Bankia and IAG said in statements only that the shares had been placed with "institutional investors".

Last year IAG Chief Executive Willie Walsh said there was no strategic value in having Bankia as a shareholder and that the group was open to another airline taking Bankia's stake, though analysts doubted a rival would step in.

There had been speculation Qatar Airways may be interested in the stake but both Walsh and Qatar Air CEO Akbar Al Bakar dismissed the possibility.

MORE TO COME

Iberia has become unprofitable in all markets, including long haul, and its problems are critical, IAG said last week. The Spanish airline reported an operating loss of 202 million euros in the first quarter.

Staff staged two five-day walkouts in February and March but halted industrial action after IAG reduced the number of lay-offs at the Spanish flag carrier to 3,141.

Bankia's stake in IAG was sold at 256 pence per share, Bankia said, a 3 percent discount to Wednesday's closing price, and bringing in a 167 million euro capital gain for the lender.

"There was a bit of fear about the sale because 12 percent of the company's capital is quite a lot ... but the discount was pretty small," said Renta 4 analyst San Felix.

IAG's shares were down 1 percent to 261.4 pence by 1303 GMT, versus a 0.1 percent decline for European travel stocks.

Bankia's recovery plan following its state rescue last year targets 8 billion euros from the sale of stakes in listed companies, which also include a 5.1 percent stake in utility Iberdrola and 20 percent of tech firm Indra.

The sale of IAG is the first to take place.

Bankia is expected to profit from other divestments as it already made provisions of 2.5 billion euros to mark down its holdings to market prices as of Dec. 31 2012.