Aer Lingus considering IAG’s improved acquisition offer of €1.36bn

Irish national flag carrier Aer Lingus plc said it was considering IAG’s improved offer of €2.55 per share, which values the company at €1.36 billion ($1.53 billion). This is the Anglo-Spanish group’s third attempt to acquire the Dublin-based company.

The bid includes a cash offer of €2.50 per share plus a cash dividend of €0.05 per share.

International Consolidated Airlines Group (IAG) owns British Airways (BA), Iberia and Spanish budget airline Vueling.

IAG wants to increase the number of take-off and landing slots it has at BA’s home base – Heathrow Airport, London. Aer Lingus is Heathrow’s fourth-busiest airline, after BA, Lufthansa and Virgin Atlantic. Acquiring Aer Lingus would give IAG more over half of all available slots.

Aer Lingus rejected the previous two offers of €2.40 and €2.30 per share respectively, saying they did not reflect the true value of the business.

Aer Lingus

With Aer Lingus, IAG would have more than half of all Heathrow’s slots.

For the transaction to go through, Aer Lingus’ board will need to approve it, as well as two major shareholders: 1. The Irish Government (holds 25.1%), and 2. Rival budget airline Ryanair (holds 29.8%), which tried unsuccessfully to buy Aer Lingus.

Pressure not to sell

While Ryanair is not likely to be pleased at IAG grabbing an airline so close to home, the Irish government, which tried to sell its stake in 2010 as part of a bailout by the IMF and EU but changed its mind, is facing increasing political pressure not to sell.

 

With just over a year before general elections, whether or not to sell its stake is a politically sensitive topic. Two main opposition parties say they would rule out any sale.

Transport spokesman for the opposition Fianna Fail party, Timmy Dooley, said in a statement on Saturday:

“The Government must act to ensure that it does not allow Aer Lingus management to cave to any bid from IAG. I’m calling on Minister Paschal Donohoe to make a statement declaring that he will use the State’s 25% shareholding to block any IAG outright purchase.”

“Ireland’s strategic national interests must be protected and that will not be done through a quick fire sale, which relinquishes valuable slots at Heathrow, risks up to 1,000 jobs and gives away forever an important strategic asset.”

Ireland’s Minister for Transport, Tourism and Sport, Paschal Donohoe, said on Sunday that his government would take “huge care” in evaluating the offer.

Unions warn of job cuts

IMPACT trade union, which represents pilots, cabin crew and some ground staff at Aer Lingus, wrote to Mr. Donohoe outlining its concerns about the consequences of an acquisition by AIG. It says the proposed takeover represents significant risks to Irish interests, particularly in terms of accessibility to Ireland for both tourism and business.

IMPACT national secretary, Matt Staunton, said:

“It also represents a significant risk to the security of employment for Irish workers employed directly or indirectly by Aer Lingus.”

Regarding the Heathrow landing and take-off slots, Mr. Staunton said:

“These slots will make greater returns for IAG if they are used to service the London-US market rather than the London-Dublin market. In such circumstances they would also encroach on the successful direct connections provided by Aer Lingus between Ireland and the US.”

“Over one million passengers per year travel from UK provincial airports to use Dublin Terminal 2 as a hub to the US. This is lucrative long haul business that British Airways / IAG would like to reclaim.”

Mr. Staunton added that a successful takeover would place up to 1,200 jobs at risk at the airline.

The airline’s name “Aer Lingus” is an Anglicisation of the Irish Aer Loingeas, which means “air fleet”.