COLOMBO, May 5 (Reuters) – U.S. private equity firm TPG, one of three bidders short-listed to buy a 49 percent stake in state-owned SriLankan Airlines, has pulled out of talks about the potential acquisition, the chairman of the national carrier said.
Sri Lanka has been looking to sell the minority stake in the airline along with management control, part of a broader move to reduce its holdings in state-owned firms and cut debt.
“After completing the due diligence process, regrettably TPG have informed us they will not pursue a potential investment in SriLankan Airlines,” Ajith Dias, chairman of the carrier said in an internal memo to employees seen by Reuters on Friday.
“It is their opinion that allocating the human and financial resources to make the airline profitable will not realise sufficient returns, compared to the many other investment opportunities that are available to them,” he said.
Officials from TPG were not immediately available for comment.
TPG, Sri Lanka-based Peace Air and a Maldivian company had been short-listed from about nine bids for the 49 percent stake, including from U.S. investment manager BlackRock Inc (NYSE:BLK) BLK.N .
The government called for bids in July and had expected to award the restructuring process by end 2016 but it said in February the bids from the three short-listed companies were too low. also said the government was pursuing other options to find a partner and the airline should continue on the path of improving its financial and operational performance.
The national carrier is struggling with colossal debt and decided to sell four new Airbus A350s after cancelling an order for four of the aircraft. It has also stopped some loss-making destinations to the Europe. Airlines was a profitable joint venture with Gulf carrier Emirates for a decade until the pair split in 2008. Subsequent mismanagement left the airline saddled with debt of about $3.25 billion, according to the Prime Minister Ranil Wickremesinghe.
SriLankan Airlines has attractive routes to India and analysts have said potential investors could be drawn to the prospect of turning around the carrier, which has about 21 leased Airbus planes.
The airline which has 7,000 staff, reported a net loss of 16.33 billion rupees for the year to March 31, narrower than its 31.4 billion loss a year earlier, thanks to lower oil prices.
It last made a profit in 2009, a year after Emirates sold its stake. (Writing by Shihar Aneez; editing by David Clarke)