Market ‘confident’ Aer Lingus bid will be approved

The stock market believes it is almost certain that the Government will give its clearance to IAG to formally bid for Aer Lingus in the coming weeks, a leading analyst has said.

Market ‘confident’ Aer Lingus bid will be approved

Stephen Furlong of Davy Stockbrokers said that Aer Lingus shares trading at €2.40 is “a very strong signal” that the market believes IAG will complete the acquisition of Aer Lingus. He said the Aer Lingus share price would collapse “all the way below €2” if the deal were to stumble for some unforeseen reason at this time.

The Coalition was being ultra-careful in dealing with any possible political issues, but there would be enormous surprise if the Government’s advisers in their report were not to endorse the deal, Mr Furlong said.

Willie Walsh’s IAG launched an offer for Aer Lingus in mid-December, and subsequently secured the approval of the Aer Lingus board when it increased the offer to €2.55 a share. The shares have been trading around €2.40 ever since.

“Trading at €2.40, the market is saying that this deal will go through. The Government’s noises have been positive. And no matter how long this report will take, I would be shocked, and the market would be shocked, if they said anything else than they should do the deal,” he said.

“The alternative is that the share price would collapse. Certainly it could go back well below €2, because there would be no other bidder,” he added. Mr Walsh has said the offer by IAG — the owner of British Airways and Spain’s Iberia — is contingent on the Government and Ryanair approving the takeover. The Government owns 25% of the airline, and Ryanair has for long held a stake of over 29%.

The Government has for weeks been negotiating with IAG about securing guarantees over the slots or routes that Aer Lingus owns out of Ireland into Heathrow.

Mr Furlong said he believed the Government had used its 25% stake to secure guarantees that IAG could not switch the slots out of Ireland for seven years, but added that fears about the future of the slots had been overdone in the first place.

He said IAG had no need to switch the key short-haul slots that Aer Lingus flies from Ireland into Heathrow into long-haul routes. He said many in the airline industry and Aer Lingus itself believe IAG would be the best owner as the airline faces in future years the renewal of its transatlantic long-haul fleet.

“IAG are sticking around until it is done. But we need to get things done. The Coalition is being ultra-cautious,” said Mr Furlong.

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