Business

Thursday 15 November 2018

IAG to make third bid for Aer Lingus

Ex-Aer Lingus boss Willie Walsh in new takeover bid for his old airline

The owner of British Airways has made a fresh attempt to buy Aer Lingus, it has been reported.
The owner of British Airways has made a fresh attempt to buy Aer Lingus, it has been reported.
Dermot Manifold

Nick Webb

British Airways owner IAG is likely to confirm it has made a third bid for Aer Lingus when the markets re-open tomorrow morning.

IAG boss Willie Walsh is understood to have offered more than €1.3bn for the Irish airline or €2.50 a share. IAG has been trying to buy Aer Lingus since early December.

A previous offer of €2.40 a share was rejected by the Aer Lingus board in late December. Neither Aer Lingus nor BA were immediately available to comment yesterday.

The State currently owns a 25.1pc stake in Aer Lingus, worth about €325m while Ryanair owns 29pc. Both must agree to any offer for it to have a chance of success.

Transport Minister Paschal Donohoe last week signalled the Government has yet to decide on the future of Aer Lingus and would consider how any deal affects Ireland's links with the rest of the world. The share price dipped after the comments as investors took fright. The latest bid was reported by Sky News yesterday.

Walsh is a former Aer Lingus pilot who ran the airline for five years before becoming chief executive of British Airways in 2005.

The Irishman is trying to create one of the world's largest airlines by buying up smaller regional operations such as Aer Lingus and meshing them into the larger IAG group. A key attraction of Aer Lingus is its ownership of large numbers of slots at IAG's hub at Heathrow Airport.

This had led to fears that IAG may use the valuable landing and take over rights for flights to and from other destinations, drastically cutting down the number of flights between London and Dublin, especially the strategically important "red eye" flights that arrive in London early in the morning.

The Government has indicated that it may not sell its 25pc stake unless it gets assurances over the continuing use of these slots to connect Ireland to the UK.

However Ryanair boss Michael O'Leary has cast doubt on the ability of the Government to secure a deal over the slots if it sells out.

The Aer Lingus board, chaired by Colm Barrington, is believed to have discussed the latest IAG proposal on Friday with Goldman Sachs, their investment banking advisers.

The Aer Lingus board includes Paddy Power chairman Nigel Northridge, former BoI governor Laurence Crowley, State Street Ireland chief Willie Slattery and outgoing ICTU kingpin David Begg.

Aer Lingus chief executive Christoph Mueller has announced that he is leaving the airline to take over a new role at Malaysian Airlines, the struggling carrier hit by two high profile aviation disasters last year - the missing flight 370 and an aircraft shot down over Ukraine.

IAG has made two previous offers for Aer Lingus, pitched at €2.30 and €2.40 a share, since early December. Both offers were snubbed on the basis that there were undisclosed conditions attached and that they "fundamentally undervalued Aer Lingus and its attractive prospects". Aer Lingus may decide to enter into formal discussions with IAG following this increased offer, although it is not clear whether the board will recommend this course of action.

Aer Lingus would not comment on reports of a new bid. "We are not giving any comment," IAG told the Sunday Independent yesterday.

Ryanair will play a pivotal role in deciding whether or not this latest bid is successful as it holds a 29pc stake in Aer Lingus. Michael O'Leary's airline has been ordered to reduce its shareholding in the airline by British competition regulators, although Ryanair is appealing this decision.

Sunday Independent

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