Wednesday 21 November 2018

Pearson to battle Ryanair in outright bid for Aer Lingus

John Mulligan

Irish businessman Stuart Pearson is to launch an outright bid for Aer Lingus next week in an audacious move backed by a war chest of between €1.5bn and €2bn.

The Irish Independent understands that bid will significantly trump Ryanair's current €748m offer for the flag carrier, possibly by a double-digit percentage margin.

That could see Aer Lingus valued at anywhere between €830m and €900m, or even higher.

The move by Mr Pearson could herald one of the highest-profile Irish takeover battles in recent years.

Earlier this week, Ryanair boss Michael O'Leary formally launched his latest takeover attempt for Aer Lingus, offering shareholders €1.40 per share.

That is half of what he placed on the table two years ago when he made his first tilt at buying the former state-owned carrier.

Acceptances

Ryanair currently owns just under 30pc of Aer Lingus and wants to secure acceptances equivalent to 90pc of the shares in Aer Lingus to cement his bid.

The Government owns 25.1pc of Aer Lingus and has retained a neutral stance on Ryanair's bid, having opposed its 2006 offer for the airline.

Mr Pearson, who has built his wealth on the back of property investments, has assembled a close-knit team of advisers to spearhead his bid.

They include former senior Ryanair and Aer Lingus executive and aviation expert Conor McCarthy, as well as New York-based investment firm Drexel Burnham Lambert.

Mr McCarthy worked at Aer Lingus for 18 years and was chief executive of Aer Lingus Commuter before joining Ryanair, where he was director of operations for four years. He has been instrumental in moulding some of the leading low-cost carriers, including the successful Malaysia-based AirAsia.

He also acted as a consultant for Aerobus, the Mexican low-cost airline in which the late Ryanair founder Tony Ryan and his family acquired a 40pc stake.

The Irish Independent believes that Mr Pearson is prepared to provide similar guarantees to Ryanair in relation to the protection of critical landing slots at Heathrow airport, owned by Aer Lingus, and a reduction in the airline's fares.

Control

Ryanair has offered to transfer control of the Aer Lingus slots at Heathrow to both houses of the Oireachtas in order to court government approval for the bid. It has also promised to cut fares at Aer Lingus by 5pc over the next three years and to pay €100m to a charity nominated by the Government if he fails to do so.

It is believed that Mr Pearson's takeover team will be making approaches to a number of Aer Lingus shareholders over the weekend, including billionaire businessman Denis O'Brien, who is thought to own over 2pc of Aer Lingus.

Mr Pearson's team is also likely to make contact with the group of Aer Lingus pilots and other staff who built up roughly a 2pc stake via a vehicle called Tailwind Nominees as part of a blocking effort against Mr O'Leary's original 2006 bid for the airline.

Mr Pearson could face a significant hurdle in his bid due to Ryanair's large stake in Aer Lingus. Aer Lingus, which yesterday unveiled a new base at Gatwick, is thought to be lining up the publication of its defence document to the Ryanair bid for Monday.

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