Business Irish

Tuesday 20 March 2018

Aer Lingus takeover nosedives as shares plummet

IAG in last-ditch bid to salvage deal

Daniel McConnell, John Downing and John Mulligan

SHARES in Aer Lingus suffered their biggest one-day fall in 15 months amid growing expectation that the Government will reject the IAG bid to buy the airline.

The shares tumbled as much as 9.5pc in a matter of hours, and despite regaining some lost ground are now well below what they were when IAG’s interest in Aer Lingus was first announced.

Transport Minister Paschal Donohoe moved last night to deny any final decision on a sale of the Government’s stake in the former national airline has yet been taken.

Speaking to the Irish Independent, Mr Donohoe said: “The Government is still evaluating what the best decision is for Aer Lingus and the country.

“Many different factors will be considered. Connectivity and the ability to grow employment remain vital concerns,” he said.

He is expected to brief his Cabinet colleagues when they meet today but a decision on the bid will not be made.

IAG executives are due back in Dublin tomorrow when they will try to salvage the bid during a series of meetings with interested parties.

The shares in the airline plummeted after the Bloomberg newswire reported that a source close to the deal had been told the Government will refuse the bid.

Politically the potential sale of Aer Lingus has caused much consternation within both Fine Gael and Labour and there was a growing sense that a deal so close to a general election was unlikely.

The news agency quoted an unnamed source close to the negotiations as saying that the Government is preparing to reject IAG’s indicative offer to buy its 25pc stake in Aer Lingus.

The stock fell by close to 10pc in Dublin yesterday afternoon, but finished around 4.5pc lower at €2.12. IAG have offered to pay €2.55 per share as part of their takeover plan.


It's understood that IAG has received no communication - either formal or informal - on whether the Government has decided whether to sell its 25.1pc stake in Aer Lingus.

After the story broke yesterday afternoon, Government officials moved quickly to steady the share price by stressing contacts with the bidders IAG were continuing and no Government decision would be taken for some time to come.

A Labour Party spokesman said reports of the deal being rejected were "premature".

The Government's interdepartmental steering group, which is examining the bid on behalf of the Government, will talk further with IAG tomorrow to explore details of the offer.

Aer Lingus executives are also preparing to separately meet the Government advisers tomorrow morning.

IAG executives have been getting ready to broaden their charm offensive by talking directly to opposition parties, trade and tourism groups.

IAG, which is headed up by former Aer Lingus chief executive Willie Walsh, has said it won't proceed without the endorsement of the Government.

Last week, Mr Walsh offered assurances on maintaining Aer Lingus routes between Ireland and the UK as he sought to overcome mounting political resistance to the proposed takeover of the airline he ran until 2005.

Market analysts said a Government rejection of the take-over bid was short-sighted and bordered on protectionism.

David Holohan, the head of research with Merrion Stockbrokers, said: "It would be devoid of economic logic. It's surprising to be honest, not overly shocking, but disappointing."

But Government sources have warned that if any deal is to be successful, IAG would have to move quickly to counter resistance to the bid.

A year out from parliamentary elections the bid risks becoming politically toxic for the coalition government.

There's also been intense political opposition to a sale of the taxpayers' stake, while a number of groups such as unions, hotel bodies, and local chambers of commerce have also voiced serious concerns.

Regional business groups warned it was better for a proposed sale of Aer Lingus to be postponed if "cast-iron guarantees" on jobs and routes couldn't be secured.

But both business and political leaders in Cork and Limerick stressed that IAG, which controls both British Airways and Iberia, should now be actively encouraged to deepen aviation links to Ireland and alliances with Aer Lingus.

Both the south-west and mid-west regions said they were deeply concerned over any threat to the existing Heathrow routes operated from Shannon and Cork as a result of any purchase of Aer Lingus by the IAG group.

Irish Independent

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