Business Irish

Friday 22 March 2019

Activist investor bets on Ryanair as it raises stake

Chicago-based Harris Associates now owns more than 5pc of the airline, a stake valued at €655m.

Ryanair CEO Michael O’Leary expects the airline’s profits to be 12pc lower this financial year than previously anticipated. Photo: Bloomberg
Ryanair CEO Michael O’Leary expects the airline’s profits to be 12pc lower this financial year than previously anticipated. Photo: Bloomberg
John Mulligan

John Mulligan

Activist US investor Harris Associates has boosted its stake in Ryanair for the third time in two months, raising its holding to just over 5pc of the airline after shares in the carrier sank following a profit warning earlier this month.

It ups the ante for the Chicago-based firm, as it bets that the airline can finally sort out all its labour strife, quell industrial action and underpin its position in Europe as higher fuel costs put pressure on smaller rivals.

In August, Harris Associates breached the 3pc shareholding level at which it had to inform the stock market of its stake in Ryanair. It continued to increase that to 4pc before notifying the stock exchange yesterday that as of October 12, it held 5.04pc of the carrier's shares.

Harris Associates owns 11.4m American Depository Receipts, which it noted is the equivalent of 57.1m ordinary shares in the airline. The stake is currently valued at €655m based on Ryanair's €13bn market capitalisation.

Its holding makes it the fourth-biggest shareholder in Ryanair, based on reported holdings at the end of last June. But it's now third-biggest, as HSBC has cut its stake since then. Ryanair CEO Michael O'Leary is one of the single biggest shareholders in the low-cost carrier, with a 3.8pc stake.

On October 1, more than €1.8bn was knocked off Ryanair's stock market valuation after it slashed its profit outlook for the current financial year. The day after, HSBC cut its 4.4pc stake in Ryanair to below a reportable threshold.

Mr O'Leary blamed higher oil prices and the impact of strike action for the reduced profit expectation, and warned that further profit warnings could be issued if more flight disruption occurs between now and the end of the year.

He said this month that while Ryanair had comfortably managed strikes, they had put people off booking flights and forced it to sell tickets more cheaply to fill planes.

Ryanair now expects to make a profit of between €1.1bn and €1.2bn in its financial year that ends next March. That's 12pc less than the €1.25bn to €1.35bn it had previously anticipated.

Harris Associates touts itself as a value investor. It manages about $140bn (€120bn) of funds and buys into companies it believes are trading at significant discounts to their underlying value.

In an interview in August as the firm started to increase its Ryanair holding, the US company's international equity chief investment officer, David Herro, said share volatility in Europe in the first half of 2018 had provided investment opportunities.

Irish Independent

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