Ryanair keeps pushing hostile takeover
After a meeting of the Aer Lingus board yesterday, its chairman John Sharman said the offer of €2.80 a share significantly undervalues the airline and he urged shareholders to reject it.
However, Ryanair, which has spent €204 million acquiring a 16% stake in the newly privatised carrier, will continue with its offer to shareholders.
It is believed the airline was in the markets yesterday buying more Aer Lingus shares. Ryanair will this morning declare how much of Aer Lingus it owns, with some speculation saying it could own around 20%. Ryanair said it is seeking 50.1% of Aer Lingus shares, which would be enough to give it control of the airline.
But Mr Sharman said: “This approach is unsolicited, wholly opportunistic and significantly undervalues the group’s businesses and attractive long term growth potential. In addition, the offer would raise significant regulatory issues as a result of Aer Lingus group’s strong position in its core markets.”
At €2.80 a share, Ryanair is offering investors a 27% premium to Aer Lingus’ initial offer price and a 12% premium to its closing price on Wednesday, the last day of trading before it launched its bid.
However, Aer Lingus closed above the offer price last night, indicating that the market thinks another bidder may emerge or Ryanair might up its offer.
Given the stake already held by Ryanair and the fact that it is continuing to buy shares in the market, it is likely to amass enough shares to stop any other bidder making a successful approach to Aer Lingus.
Ryanair chief executive Michael O’Leary said the takeover offered a “unique” expansion opportunity.
The two airlines would be run on a standalone basis with separate boards and management and would compete aggressively for passengers.
Mr O’Leary said Aer Lingus passengers can expect fares to fall by 10% over the next four years and that premier class cabins on long-haul routes will be upgraded to include flat class beds and improved service.
Mr O’Leary told the Irish Examiner the tie-up will create one of the largest airlines in the world with combined annual passenger traffic of over 50 million.
“If you look at the logic of putting Ryanair and Aer Lingus together, there are enormous cost savings. The strategy we’ve set out is the same one that Aer Lingus and the Government said — it is just faster, further and quicker.”
He said Aer Lingus would benefit by getting access to new aircraft at cheaper prices through Ryanair’s long-time deal with Boeing and added that the long-haul fleet would also benefit from Ryanair’s ability to negotiate prices with manufacturers.
The airline has also guaranteed that it will not sell off the valuable landing and take-off slots at Heathrow and would scrap the fuel surcharge if the price of oil falls further.
It will also ensure Aer Lingus profits will grow through savings on sales and marketing, growing ancillary revenues such as car hire, improved and purchasing power with suppliers.
Mr O’Leary said the deal was positive for Ryanair shareholders.
“We are investing some of our spare cash, which is on deposit at 3.5% in an airline which is giving a 5% yield. It means that it will be earnings enhancing for Ryanair and a better and use of our cash.”
