Ryanair is offering €1.40 per share in cash for the 70% of Aer Lingus that it doesn’t already own, a 28% premium to the current share price that would value the carrier at almost €750m. Ryanair has already made one unsuccessful bid for the carrier, which is 25% owned by the Irish government, back in 1996 – but that was derailed by opposition from the competition regulators and the carrier’s own employees. Given that Ryanair's offering only half as much money this time around, is it really likely to have any more luck?
The good news (well, in some respects) is that the aviation industry is in a very different state now to two years ago. After a period of soaring costs and slowing demand, many airlines have gone to the wall while others have been forced to consolidate – hence the proposed tie-ups between BA and Iberia, Lufthansa and BMI, and Alitalia with anyone who’ll have it. Aer Lingus has suffered as much as anyone: fares are up, passenger numbers are down and it’s expecting losses both this year and next.
So it’s been a rotten two years for Aer Lingus, which has seen its share price plummet by two-thirds. As Ryanair boss Michael O’Leary put it with typical delicacy this morning: ‘Aer Lingus, as a small, stand alone, regional airline has been marginalised and bypassed… Over the past 2 years, the management of Aer Lingus have failed its shareholders, customers and staff.’ Indeed, Ryanair took the opportunity to put the boot into its rival’s prices, fuel surcharges, on-time performance, director pay and industrial relations in its statement today. Not the most diplomatic of approaches, as you’d expect…
However, it clearly hopes that investors won’t be able to resist the chance to cash out at a healthy premium. The Irish government could certainly do with the money – with its economy in just as bad a mess as ours, it’s currently hiking taxes (including VAT, even as the rate drops north of the border); this €188m ‘would make a valuable contribution towards current budget spending in areas such as health and education,’ said Ryanair today, waving a big wad of notes under the government’s nose temptingly. It even tried to reassure employees (who own another 25%) by promising that it would keep the Aer Lingus brand separate and look to double its fleet (although given its reputation for cost-cutting, you couldn't blame them for feeling nervous).
On the other hand, Ryanair would still need to get the deal past the EU regulator, who was previously worried about the monopoly a combined group would have over Irish flights. And we suspect that after years of slagging them off, there’ll be plenty of people in government who’ll have an ‘over my dead body’ approach to selling to O'Leary. But would the alternative be even less palatable?
In today's bulletin:
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Ryanair makes second pass at Aer Lingus takeover
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