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‘Bid not even equal to cash reserves’

The Ryanair bid for Aer Lingus undervalues the company as it is not equal to the company’s cash reserves, according to Transport Minister Leo Varadkar.

He said the Ryanair bid was not even equal to the cash reserves that Aer Lingus has accrued.

“Aer Lingus has €700m in cash and the offer being made actually values Aer Lingus lower than that,” he said.

Aer Lingus has €759m in cash according to its most recent financial statement, but the company also has total debts of €577m.

This is before the issue of the outstanding pension deficit is taken into account.

Aer Lingus may be liable for a share of an estimated €600m pension deficitdivided among several employers including the airline, the Dublin Airport Authority, and amaintenance repair company.

When questioned about the valuation a spokesperson for the Department of Transport said: “All sorts of things are taken into account when making a valuation including upsides and downsides.

The minister was stating his view that the company is undervalued.”

The minister’s view that Aer Lingus is undervalued is shared by Denis O’Brien, who owns more than 3% of the flag carrier. Mr O’Brien claimed the only reason he invested in Aer Lingus was to thwart Ryanair’s ambition to take over the carrier as he did not want investors in Ireland to be flown by the discount airline.

“I didn’t think it was a great idea for Ryanair to be flying foreign direct investors into Ireland,” Mr O’Brien told Bloomberg.

“Most people when they come to invest in Ireland they have a strong impression when they fly on Aer Lingus that this is a good country to invest.”

Mr O’Brien said he had been adding to his stake in the former national carrier and now had a stake of 3.6% to 3.8%.

There are “severe” regulatory hurdles facing Ryanair’s proposed €694m bid for Aer Lingus, said Mr O’Brien.

“It is all undervalued, and it’s all a game.”

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