Saturday 21 October 2017

Aer Lingus 'will only get future bid if it has cash woes - and for knockdown price'

Colm Barrington, Chairman of Aer Lingus
Colm Barrington, Chairman of Aer Lingus
John Mulligan

John Mulligan

Aer Lingus is only ever likely to attract another buyout approach if it gets into financial difficulty and can be bought at a knockdown price to the €1.4bn IAG is offering, a leading financial analyst has warned.

David Holohan, the head of research at stockbroking firm Merrion Capital, told the Irish Independent that the drawn-out attempt by IAG to buy the Irish carrier will have put any other airline or investor off ever making an offer to buy Aer Lingus, unless it's in financial distress.

While the Cabinet won't be discussing a sale of Aer Lingus at its meeting tomorrow, there's still no certainty that it will be on the agenda next week either.

Aer Lingus holds its annual general meeting on May 1, and would undoubtedly be hoping to be in a position to have received a formal takeover from IAG by that date, or at least a decision by the Government that it will sell the State's 25.1pc stake to IAG.

The Aer Lingus board, headed by chairman Colm Barrington, has already made it clear that it wants the IAG takeover bid to succeed.

It's expected that a report being prepared by a steering group on the planned purchase of Aer Lingus by IAG will be virtually complete this week.

That report is designed to help the Government weigh whether or not it should sell the State's stake in Aer Lingus to IAG.

But it's not known at this stage whether that report will contain an explicit recommendation as to what the steering group believes is the best course of action, or if it will simply detail the pros and cons of an IAG takeover for the Government to deliberate on.

Mr Holohan said that while IAG obviously remained interested in buying Aer Lingus, its patience was undoubtedly being tested.

It's now almost four months since the airline group, which owns British Airways and Iberia, made its initial approach to buy Aer Lingus, valuing the Irish carrier at €1.36bn.

Last month, it had been widely expected that the Government would finally make its mind up at this week's Cabinet meeting.

Mr Holohan predicted that if the Government says no at this stage, IAG may still decide to pursue an acquisition of the 74.9pc of Aer Lingus that it could still buy.

That would include the near 30pc stake in Aer Lingus owned by Ryanair and the near 5pc owned by Abu Dhabi airline Etihad.

Ryanair is expected to swiftly back the IAG takeover of Aer Lingus if the Government gives the all-clear.

However, even if the Government sanctions a sale of the State's stake, the matter has to go to a Dáil vote.

"The case for another bidder coming in is quite remote," said Mr Holohan.

He believes the drawn-out process IAG has gone through would put any other potential bidder off making an approach.

IAG boss Willie Walsh warned an Oireachtas Committee in February that if he ever makes a second offer to buy something, it's not necessarily always for a higher price.

If IAG did make a successful hostile takeover approach, it would leave the Government without any of the assurances it has sought on air connectivity between Ireland and the UK and North America.

It would also have no say on how take-off and landing slots controlled by Aer Lingus at Heathrow would be used by IAG.

Irish Independent

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