Saturday 24 March 2018

Ryanair launches formal bid for Aer Lingus valuing airline at €694m

Conor Humphries

RYANAIR launched a third bid to take over Irish rival Aer Lingus today, offering shareholders a 38pc premium to the market in a deal that would require regulators to drop opposition to a merger.

Europe's largest budget carrier, which already owns just under 30pc of Aer Lingus, said in a statement after markets closed that it would offer €1.30 per share in a bid to secure at least 50pc.

The bid, which values Aer Lingus at €694m would be subject to the approval of the European Commission, which in 2007 blocked an earlier bid by Ryanair for Aer Lingus on competition grounds.

The surprise bid came after repeated offers by Ryanair to sell its stake in Aer Lingus and days after Britain's competition watchdog launched a probe into the control it already wields at its Irish rival.

"This offer represents a significant opportunity to combineAer Lingus with Ryanair, to form one strong Irish airline group capable of competing with Europe's other major airline groups,"Ryanair's chief executive, Michael O'Leary, said in a statement.

Aer Lingus, which operates out of Europe's largest airports, would complement Ryanair's fleet, which focuses on cheaper regional bases, he said.

The Government, which is selling its own 25pc in Aer Lingus as part of its EU/IMF/ECB bailout programme, has said in the past that it opposes an increase in Ryanair's control.

Transport Minister Leo Varadkar said today he would assess the offer.

Mr O'Leary has long pursued the takeover of Aer Lingus, the country’s 75-year-old former flag carrier, to cap the rise of Ryanair, which started with one 15-seater plane in 1985.

In almost two decades in charge, O'Leary's low-cost model has come to dominate European aviation.

Ryanair carried 77 million passengers last year compared with 9.5 million passengers at Aer Lingus.


But to complete the deal, Ryanair would have to convince authorities that a combined airline controlling 80pc of traffic between the United Kingdom and Ireland would not stifle competition.

Britain's Office of Fair Trading last week ruled that Ryanair's ownership of a minority stake threatened competition.

"It is very hard to see how it would be accepted by European competition authorities," said Brian Devine, an analyst with NCB Stockbrokers.

Ryanair said it believed it could overcome concerns about competition in the Irish market that derailed earlier bids, citing consolidation within the industry and increased capacity at Dublin airport.

"Ryanair believes that any competition concerns ... can be addressed by Ryanair making appropriate remedies prior to the completion of this offer and by significant synergies and cost efficiencies resulting from this combination," it said in a statement.

It said the fact that an employee share trust, which had opposed a merger, has been disbanded also increased the chances of securing 50 percent approval.

Irish transport minister Leo Varadkar said he would make a statement on the offer after consulting with his cabinet colleagues.

Aer Lingus' shareholders include Etihad Airways, which bought a 3pc stake in Irish airline in May.

© Reuters

Business Newsletter

Read the leading stories from the world of Business.

Also in Business