Wednesday 25 April 2018

Markets remain grounded as Ryanair bids for Aer Lingus

Peter Flanagan

Peter Flanagan

RYANAIR formally submitted its €694m bid for Aer Lingus yesterday, but markets remain sceptical that the bid will be successful.

By the close of trading in Dublin, Aer Lingus had climbed 1.33pc to €1.07 -- well below Ryanair's offer, which equates to €1.30 a share.

Ryanair, which is making the offer through its subsidiary Coinside, has had two previous bids for the former national carrier rejected and has since been hit with a probe by UK regulators into whether it should be forced to sell its near 30pc holding in the airline.

Brian Devine, from NCB stockbrokers, questioned if the bid would succeed, even if Aer Lingus shareholders accept the offer.

"There is nothing in today's offer document that changes the competition issues that have prevented a takeover up to now.

"Even if investors vote to accept Ryanair's bid, that still does not change the conditions that will be investigated by European regulators," he added.

Clearance

Ryanair's offer finally came a month after the budget airline initially announced plans to bid for the remaining 70pc of the carrier that it does not own.

Gerald Khoo, an analyst with Espirito Santo, took a similar tack. "What it all boils down to is, 'Are they going to get clearance?'," he said.

Ryanair boss Michael O'Leary said the offer had been made after Aer Lingus "failed to deliver value to shareholders".

He also claimed the offer should be approved by the European Commission.

"(Any questions the) European Commission may have can be addressed by Ryanair making appropriate remedies prior to the completion of the offer and by significant synergies and cost efficiencies resulting from this combination," he said.

In his letter to Aer Lingus shareholders, Mr O'Leary highlighted a number of reasons to accept the offer, including the fact that the industry is now consolidating across the world, while the Government has decided to sell its 25pc stake in the airline.

Shareholders have until September 13 to accept the offer.

Aer Lingus did not comment, but have previously opposed the bid.

Morgan Stanley and Davy Corporate Finance are advising Ryanair.

Aer Lingus is being advised by Goodbody Stockbrokers, Rothschild and UBS.

Meanwhile, the UK competition commissioner has temporarily halted its investigation into whether Ryanair should be allowed to retain its shareholding in Aer Lingus pending the result of the bid.

Ryanair closed the day 0.3pc lower at €4.12.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business