Qatar Airways spends $600 million to lift stake in BA owner to 25%

LONDON/DUBAI (Reuters) – Qatar Airways has bought a $600 million stake in British Airways-owner IAG (ICAG.L) to increase its holding to 25.1%, strengthening its position ahead of a change in IAG management.

In an endorsement of the Anglo-Spanish group just weeks before its founder Willie Walsh steps down, Qatar said on Wednesday the move showed its support for IAG and its strategy.

Qatar previously held 21.4% of IAG, which also owns Spanish carriers Iberia and Vueling and Ireland’s Aer Lingus. IAG’s share price has risen by 52% in the last six months.

Qatar increased its holding after IAG lifted restrictions on investments from outside the European Union last month.

IAG, which is registered in Madrid and headquartered in London, capped its equity held outside the EU at 47.5% a year ago to comply with EU ownership rules, a situation that could be further complicated by Britain’s departure from the EU.

It said in January non-EU ownership had fallen to 39.5%, so the cap was no longer required.

At 1110 GMT, IAG shares were up 0.8% at 637 pence, giving it a market value of 12.67 billion pounds ($16.4 billion).

State-owned Qatar Airways, one of the Middle East’s biggest carriers, has said its investments in other carriers were mostly for financial purposes. It does not have an IAG board seat.

It bought some of its holdings after the United Arab Emirates and Saudi Arabia banned it from their airspace after a regional political dispute, which Qatar Airways has blamed for its recent losses.

It has minority holdings in international carriers Cathay Pacific (0293.HK) and China Southern (600029.SS), and said earlier this month it was interested in doubling its holding in LATAM Airlines Group (LTM.SN) to 20% and was in talks to buy a 49% stake in Africa’s RwandAir.

The airline also owns 49% of Air Italy, whose investors this month said was being placed into liquidation because of “persistent and structural market problems”.

IAG was created by a merger between the British and Spanish flag carriers in 2011, overseen by Walsh, who will step down next month.

Luis Gallego, who has led Iberia since 2014, will succeed Walsh, an appointment that analysts said signaled little change of direction for the group.

Qatar Airways Group Chief Executive Akbar Al Baker said: “Our investment to date has been highly successful and the announced increase in our shareholding is evidence of our continued support of IAG and its strategy.”

The cost of increasing its IAG holding is 465 million pounds, based on the closing price of IAG’s shares on Tuesday.

Qatar first invested in IAG in 2015, buying 9.99% of the company, and has steadily increased its holding since then.

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