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Dan White: Willie Walsh bid for Aer Lingus is surely the beginning of the endgame

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Willie Walsh

Willie Walsh

Willie Walsh

Aer Lingus has confirmed that it has received and rejected a takeover approach from International Airlines Group (IAG), the company formed from the 2011 merger of British Airways and Spanish carrier Iberia.

Just to add further spice to an already peppery dish, the chief executive of IAG is none other Willie Walsh, who quit as Aer Lingus boss in 2005 after the government of the day rejected his proposed management buyout.

Mr Walsh's timing is hardly coincidental. Aer Lingus' largest shareholder is Ryanair, which swooped to pick up a 29.9pc stake following the 2006 privatisation of Aer Lingus. Ryanair has since bid unsuccessfully, not once but twice, for the airline.

Not alone has Ryanair's attempt to acquire full ownership of Aer Lingus been blocked by the EU Commission, the UK Competition Commission is trying to force it to reduce its Aer Lingus stake to just 5pc.

However, even before news of the IAG takeover offer, the recent fall in the price of oil had pushed up the Aer Lingus share price. It now stands at approximately €2.09.

While the price offered by IAG has not been publicly revealed, word is that it is in the region of €2.20 - within spitting distance of the average €2.40 share price which Ryanair paid for its shareholding.

temptation

With most observers expecting IAG to come back with a higher offer, say €2.40 a share, the temptation for Ryanair boss Michael O'Leary to take the money and run would be enormous.

Apart from Ryanair the other major shareholders in Aer Lingus are the Government, which retains a stake of just over 25pc, Abu Dhabi airline Etihad with 4.9pc and fund manager Crystal Amber with 2.8pc. The latter has already made it clear that it expects a higher offer to be made for for Aer Lingus.

Add it all up and just four shareholders control 63pc of Aer Lingus.

Of these large shareholders only one, the Irish government, is a likely long-term holder of the stock. All of the others are potential sellers if the price is right.

Even Etihad, which was rumoured to have harboured ambitions to bid for Aer Lingus itself, is now a probable seller with the falling oil price curbing the enthusiasm of its principal shareholder, the government of Abu Dhabi, for expensive overseas takeovers.

The likelihood of an increased IAG bid for Aer Lingus poses an interesting dilemma for the Government.

windfall

While its 25.1pc stake is just above the 25pc threshold that would allow it to block efforts by any bidder to compulsorily acquire its Aer Lingus shares, would the interests of the Irish taxpayer be best served by retaining a minority stake in an IAG-owned Aer Lingus?

Almost certainly not.

At €2.40 a share the government would pocket €322m from the sale of its Aer Lingus stake.

That's still a tidy little windfall that could, for instance, be set against the likely overrun in health spending next year.

All of which means that, no matter how you look at it, Aer Lingus' days as an independent standalone company are almost certainly drawing to a close.

An Aer Lingus takeover is now very much a question of "when" rather than "if".

Unless a rival bidder emerges within the next few weeks that new owner is almost certainly going to be IAG, which has long coveted Aer Lingus' precious takeoff and landing "slots" at London's Heathrow Airport.

Almost a decade after he stepped down, it very much looks as if Willie Walsh will soon be back at the Aer Lingus controls.

 


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