Tuesday 22 August 2017

IAG extends Aer Lingus offer after Ryanair's deal delay

IAG needs 90pc of acceptances in relation to Aer Lingus shares before it can compulsorily acquire the remainder. Photo: PA
IAG needs 90pc of acceptances in relation to Aer Lingus shares before it can compulsorily acquire the remainder. Photo: PA
John Mulligan

John Mulligan

British Airways owner IAG has been forced to extend the deadline for Aer Lingus shareholders to accept its €1.36bn offer to buy the Irish airline after Ryanair confirmed that it won't formally accept the deal until the middle of next month.

The Irish Independent revealed yesterday that Ryanair hadn't formally accepted the €1.36bn offer by IAG's deadline of 1pm yesterday.

It meant IAG, headed by Willie Walsh, was forced to extend the offer deadline to August. It will have updated the stock exchange this morning. IAG had previously extended the offer period to yesterday.

The delay in accepting the offer doesn't pose any threat to the takeover, however.

But it had been expected that Ryanair, which owns 29.8pc of Aer Lingus, would have met yesterday's deadline, allowing Aer Lingus shareholders to start receiving their cheques from IAG within a couple of weeks.

It now means those shareholders will have to wait until the end of August or start of September for their windfalls to land through their letterboxes.

Mr Walsh was also no doubt hoping that he could have told IAG investors this morning as the airline group releases its first-half results, that his seven-month pursuit of Aer Lingus was finally at an end.

Now he'll have to keep the champagne on ice.

IAG needs 90pc of acceptances in relation to Aer Lingus shares before it can compulsorily acquire the remainder.

Ryanair has previously confirmed that it will accept the IAG takeover offer, however, and reiterated that commitment yesterday.

A spokesman said: "As we confirmed in our first quarter results release on Monday last (27 July) we don't expect to receive any proceeds from the sale of our stake in Aer Lingus until September and so we plan to formally submit our signed acceptance of the IAG offer in mid-August."

It's believed that Ryanair may have deferred accepting the offer for accounting purposes, so it can delay the arrival on to its balance sheet of the just over €400m it will receive from selling its Aer Lingus stake.

It's not known why that's the case, though. Ryanair is a third of the way through its second financial quarter.

Ryanair will hold its annual general meeting in September and is likely to update its shareholders then as to what its plans are for the €400m it will get back for its Aer Lingus stake.

A current share buyback programme at the airline ends soon, so possibilities include that being extended, or another special dividend being paid to shareholders. Ryanair could also decide to use the cash to help pay for its new aircraft orders. "Our policy would be to continue with a mix of special dividends and share buybacks," said Ryanair chief executive Michael O'Leary this week.

"We're 90pc of the way through this year's share buyback programme. We expect to complete it by about the end of August, when we'll have added another €400m in share buybacks. I think the board will then consider what we do, probably around September, if and when we receive the proceeds from the sale of Aer Lingus."

Ryanair's revenue in the three months to the end of June rose 10pc to €1.49bn. It carried 24.3 million passengers in the period - 16pc more than it did in the first quarter last year.

Aer Lingus also released results this week.

It said its total passenger revenue rose 7.3pc to €700.8m in the first half of the year, while it posted a €13.9m pre-exceptional operating loss - 40pc worse than it did a year earlier.

Its second-quarter pre-exceptional operating profit fell 10.9pc to €34.5m, with the airline having taken an adverse €21m foreign exchange hit due to a much stronger US dollar and sterling.

Irish Independent

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