Saturday 21 October 2017

Smurfit warns Government on risks around selling Aer Lingus

Dr. Michael Smurfit
Dr. Michael Smurfit
Ronald Quinlan

Ronald Quinlan

One of Ireland's most respected business figures, Dr Michael Smurfit, has warned the Government against relying on the commitments it may receive from IAG as part of its proposed takeover of Aer Lingus.

In an interview with the Sunday Independent, Dr Smurfit, who earned a reputation in the course of his career for being a 'take-over king', said that while he wasn't opposed to IAG's bid - believing it to be "good for Ireland and the [Aer Lingus] shareholders" - it would be "very difficult to tie everything down" to everyone's satisfaction.

He said: "I think it's very difficult to rely on undertakings for the medium and long term. If you look at what happened to Cadbury in England when they were taken over by Kraft Foods; they [Kraft] undertook to reverse a decision by Cadbury to shut its factory in Somerdale down, but they didn't [keep their promise]. It's happened quite a number of times in my experience."

Dr Smurfit added: "It's very hard to get the sort of guarantees that last a long time when you lose control of a business, or when another company takes over. Changing economic circumstances can make commitments difficult to maintain. Who knows what the future holds?"

Asked if the IAG offer of €1.3bn wasn't undervaluing Aer Lingus, given that the airline's Heathrow slots are worth between €770m and €925m alone, Dr Smurfit said he didn't see this as a "factor in the equation" now under consideration.

He said: "The slots may well be valued at that, but as they're not going to be sold and as Aer Lingus needs them, they're really a tied-up asset aren't they? They can only use them as collateral to take on more debt if they want to expand themselves and buy more aircraft. I don't see that as a factor in the equation because if I was looking at buying Aer Lingus, which obviously I'm not, I wouldn't consider that per se an asset because they need those slots just in the normal run of business."

While noting IAG CEO Willie Walsh's undertaking to retain Aer Lingus as a separate entity, Dr Smurfit cautioned this might not apply in the future, saying: "He [Mr Walsh] won't be there forever. The next guy coming in might have a different view."

Dr Smurfit's views on the Government's seeking of assurances from IAG were echoed by Ryanair CEO Michael O'Leary in an interview with the Sunday Independent last week.

He said: "All this nonsense about getting assurances. You can't get assurances."

Sunday Independent

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