Iberia has received a takeover approach from Spain's Gala Capital that values the airline at up to 3.7 billion euros ($5.4 billion), topping an earlier approach led by private equity group TPG.
Investment firm Gala, along with bank BBK, the chairman of Spanish airline Air Europa and Spanish billionaire Alicia Koplowitz, proposes to offer 3.6 to 3.9 euros a share for Europe's fourth-largest airline, Iberia and Gala said on Thursday.
That would beat an earlier approach from U.S. firm TPG, British Airways and three Spanish funds, which signaled their interest at 3.60 euros on March 30.
One analyst said the new proposal could put off any other prospective bidders waiting in the wings.
"With the bid level at 3.90 euros, that's a very dissuasive offer for anyone who might be sniffing around on the outside," said Penny Butcher, airlines analyst at Morgan Stanley.
Iberia shares were suspended but rose 4.9 percent to 3.66 euros when trading resumed, short of the top end of Gala's proposed bid range.
Gala is the investment vehicle for some of Spain's richest families, many of them worth billions of euros after investing in the country's decade-long construction boom.
The firm said it expected to spend about four weeks going through the Spanish airline's books and then would be in a position to present an offer "in a very short space of time."
Although the bid group is advised by former Iberia CEO Angel Mullor and includes Air Europa boss Juan Jose Hidalgo, it does not have an airline officially on board. Iberia would remain independent and under current management if a bid were successful, Gala said in a statement.
Gala's move surprised analysts who had expected potential rivals to wait for a formal bid from TPG, even though their group has already taken many months longer than expected to bid as the global credit crunch is thought to have complicated financing.
TPG's planned bid remained unaffected by Gala's approach and financing was "not an issue," a source familiar with the situation said.
TPG and British Airways declined to comment on Gala's approach. The UK airline referred to previous comments from CEO Willie Walsh that an announcement on Iberia was expected in two to four weeks.
"TPG seemed to have having a hard time getting a bid together and from that I infer that (their own bid) was on the high side for them. This may force their hand," Butcher added.
Iberia holds a board meeting on Nov. 22 at which the approach may be evaluated.
The airline, which carried 27.8 million passengers last year, is attractive for its long-haul routes between Europe and Latin America and has boost profits by cutting back on domestic routes where it faces cut-throat competition.
Air France-KLM has said it is weighing up its options on the Spanish carrier -- an spokeswoman for the airline repeated that it was "looking at the dossier" -- although it is also studying a bid for Italy's Alitalia.
Sources close to Air France have not ruled out a bid for Iberia but say any such bid would be a financial deal rather than an industrial partnership as the two airlines compete heavily on routes to Latin America.
Lufthansa has for months said Iberia is too expensive at 3.60 euros a share although analysts say the German carrier must be tempted as Iberia's number-one position on Europe-Latin America routes would fill one of the few remaining gaps in its network.
Lastly a group of Spanish businessmen, led by former Iberia Chairman Javier de Salas and including former Inditex Chief Executive Jose Maria Castellano, has also been preparing to bid for Iberia, according to sources close to the bidders.