Monday 26 September 2016

Focus to switch to Ryanair as IAG makes formal €1.36bn offer for Aer Lingus

Published 27/05/2015 | 07:31

Aer Lingus is the subject of a takeover bid
Aer Lingus is the subject of a takeover bid

IAG has made a formal offer for Aer Lingus after Cabinet yesterday agreed to sell the State's 25.1pc stake in the airline.

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The deal offers Aer Lingus shareholders €2.55 a share, valuing the airline at around €1.36bn.

The deal will now hinge on the actions of Aer Lingus' largest shareholder, rival airline Ryanair which holds a near 30pc stake in the company.

A statement from AERL Holding, a wholly-owned subsidiary of IAG, said: “The IAG board believes that the acquisition of Aer Lingus has a compelling strategic and financial rationale for the IAG Group at an attractive price for Aer Lingus shareholders.

“The acquisition is expected to provide substantial benefits to both IAG and Aer Lingus customers through an enhanced network, particularly to North America, using Dublin as a natural gateway hub for transatlantic routes.

The announcement will now shift the focus around the deal to Aer Lingus’  largest shareholder, Ryanair.

The company has so far given little indication of how it views the deal, with CEO Michael O’Leary yesterday saying that the Ryanair board “will consider any offer from IAG on its merits, if or when it is received”.

Read more: Coalition to sign off on offer for Aer Lingus

The company holds a 29.9pc stake in its smaller rival, but has been ordered to cut its share to 5pc by the  UK’s Competition and Markets Authority due to competition concerns.

Ryanair has so far been battling the ruling, but is rapidly running out of avenues of appeal. The UK Court of Appeal has already upheld the CMA decision and now Ryanair is trying to appeal to the UK’s Supreme Court. However, there is no certainty that it will even get permission to make that appeal.

Commenting on the formal offer, Willie Walsh, CEO of IAG said that Aer Lingus, Ireland and IAG “would all benefit from this deal”.

He added that Aer Lingus would maintain control of its brand and operation “while gaining strength as part of a profitable and sustainable airline group”.

Paschal Donohoe
Paschal Donohoe
Colm Barrington
Aer Lingus Aircraft At Dublin Airport

Read more: Major shift in position as Labour TDs agree to back takeover by IAG

He said: “Ireland's vital air links to Europe and North America would be enhanced, creating new jobs, with cast-iron guarantees on ownership of Aer Lingus' Heathrow slots and their use on flights to Dublin, Cork and Shannon. Acquiring Aer Lingus would add a fourth competitive, cost effective airline to IAG, enabling us to develop our network using Dublin as a hub between the UK, continental Europe and North America, generating additional financial value for our shareholders."

Commenting on the Offer, Colm Barrington, Chairman of Aer Lingus said: "This is a compelling transaction for Aer Lingus, its shareholders, its employees, its customers and for Ireland. Shareholders will realise an attractive return through the premium that the IAG offer provides over the level of our share price immediately prior to the announcement of IAG's offer.

"The company will reap the commercial and strategic benefits of being part of the much larger and globally diverse IAG Group and as a member of the oneworld alliance of 17 airlines that together carry over 500 million passengers."

The Dáil is to begin debating on the sale of the Government's stake in the airline today with a vote expected tomorrow. The Government is hoping that it can receive approval for the sale before TDs return to their constituencies for the holiday break.

An extraordinary general meeting of Aer Lingus will now be convened to approve the deal.

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