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. Last Updated: 07/27/2016

Doubt Over Aeroflot Bid Hits Shares of Alitalia

bloombergAeroflot denied reports that it would withdraw its bid for the Italian carrier.
Alitalia's shares fell nearly 4 percent at one point Monday on a report that Aeroflot would pull out of a bid for the Italian flag carrier, but later rallied after Aeroflot insisted its bid stood.

Interfax earlier Monday had cited several anonymous sources close to the company as saying that Aeroflot would announce it was pulling out of the race at a board meeting Saturday.

"In this case it is the taking part rather than winning that is most important," one source said. Another source blamed the Italian government for asking too high a price.

But Aeroflot spokeswoman Irina Dannenberg said that the information had not come from Aeroflot and reiterated the company's interest in Alitalia.

"We are still participating in the bidding for Alitalia," Dannenberg said.

Aeroflot announced in early April that it was teaming up with Italy's UniCredit bank to bid for a 49.9 percent Italian government stake in the airline. Alitalia is currently valued at about 1 billion euros ($1.34 billion).

A spokeswoman for UniCredit refused to be drawn on the reports, saying that the bank did not comment on market speculation.

Shares in Alitalia initially fell to a 2007 low of 0.745 euros on the back of the reports. Aeroflot's stock rose 3.2 percent to 67 rubles.

If Aeroflot were to pull out of the race, it would leave Italian airline AirOne, run by Carlo Toto, as the only remaining bidder. Private U.S. consortium TPG pulled out of the bidding on May 29.

Alexander Lebedev, the majority owner of National Reserve Corporation, which owns 30 percent of Aeroflot, criticized Aeroflot's management for its handling of the bid. He drew parallels to a protracted and heavily politicized deal to buy 22 Boeing Dreamliner jets.

"They have lost time and projected a very negative image," Lebedev said by telephone Monday.

Lebedev said Aeroflot had failed to bring on board expert advice, conduct appropriate negotiations with the Italian government or involve an established European airline, such as Air France.

"The Aeroflot management is not capable of doing this," Lebedev said.

Aeroflot has long been looking to buy into the European market, in an attempt to widen its access to continental routes and cut down on crippling custom duties.

Analysts originally questioned the wisdom of Aeroflot's move for Alitalia, citing Italy's well-organized trade unions and huge pension liabilities as key problems. Alitalia posted a $540 million loss for 2006.

Aeroflot last month made an offer to buy Serbian flag carrier JAT.