Thursday 18 January 2018

Aer Lingus takeover: So what happens now?

Ryanair CEO Michael O’Leary (below) said selling its 29.8pc Aer Lingus stake to IAG is in the best interests of Ryanair shareholders.
Ryanair CEO Michael O’Leary (below) said selling its 29.8pc Aer Lingus stake to IAG is in the best interests of Ryanair shareholders.
John Mulligan

John Mulligan

So what happens now?

The next move is down to the European Commission. It has to sanction the Aer Lingus takeover but appears to be in favour of the deal given the concessions that have been offered by IAG.

What kinds of concessions?

IAG, which owns British Airways, as well as Spanish airlines Iberia and Vueling, will yield some takeoff and landing slots in London. The slots can then be allocated by the European Commission to competitors.

Slots at Gatwick and Heathrow are most likely to be up for grabs, but it's possible slots at Gatwick could be the main focus.

IAG has also offered to establish so-called pro-rata agreements with rivals, allowing those airlines to carry passengers on connecting IAG flights in order to feed their own routes.

Why has Ryanair agreed to sell up?

Ryanair had two options that would ultimately lead to the same outcome: agree to sell up now; or continue to battle the UK's Competition and Markets Authority (CMA) against its decision to force Ryanair to cut its Aer Lingus stake to no more than 5pc.

Ryanair has been exhausting legal avenues to oppose the CMA decision, and it's a near certainty that it would have ultimately have been forced to capitulate to the CMA order.

Had it continued to fight the CMA, legal costs would have continued to mount, and Ryanair management would continue to have been distracted at a time when they've plenty of other things on their agenda, including significant expansion of the airline.

What will happen at the Aer Lingus EGM next week?

With Ryanair, the Government, and Etihad all having agreed to sell their Aer Lingus shares to IAG, the meeting is likely to be academic.

Those three shareholders account for almost 60pc of Aer Lingus shares. Institutional shareholders will row in behind. IAG needs 90pc to initiate a mandatory acquisition or 'squeeze out' of remaining shares.

You can probably expect some vocal opposition from some small investors at the EGM, but any efforts will be largely futile.

When will Aer Lingus be part of IAG?

Assuming no hiccups, September, but maybe even next month.

John Mulligan

Irish Independent

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