Aer Lingus rejects second takeover offer from BA owner

Aer Lingus has rejected a second takeover approach from the owner of rival British Airways.

International Consolidated Airlines Group (IAG) has confirmed that it submitted a second proposal to offer €2.40 a-share, a total of €1.28 billion, subject to certain conditions, for the Irish flag carrier.

However, it said that the Aer Lingus board rejected the proposal, which was subject to certain pre-conditions.

It also stated that it proposed paying €2.30 a-share for the airline when it made its first approach in mid-December.

IAG issued the statement in response to speculation sparked by a surge in the Aer Lingus share price. The stock closed 10 per cent up at €2.50 following claims that the group had offered as much as between €2.60 and €2.70 a-share.

Investors mopped up almost 3.9 million of its shares over the course of a day that saw the stock add 6 per cent in the morning before losing most of those gaine by lunchtime and then rebounding in later trade.

IAG added that there could be no certainty that any further proposal or offer would be forthcoming.

Friday’s activity followed speculation earlier in the week that IAG would make a fresh approach for Aer Lingus and could bid more than €2.40 a share.

IAG which owns BA and Spanish carriers, Iberia and Vueling, made its second approach on December 29th.

Its chief executive, Willie Walsh, who held the same role at Aer Lingus between 2001 and 2005, was in Dublin for a conference, but said that he was unable to comment.

The Irish Takeover Panel, which regulates the merger and acquisition of quoted companies, has deemed Aer Lingus to be in an offer period.

This bars anyone connected with either company from making public statements beyond what is officially released to the markets.

A leading aviation analyst in London has also predicted IAG will return with an improved takeover offer for Aer Lingus.

Andrew Lobbenberg of HSBC said that a deal makes sense and, while complicated, is achievable. "We see the logic of a combination between IAG and Aer Lingus," he said in a research note.

Mr Lobbenberg said any deal is likely to require an agreement with the Irish Government, which holds a 25 per cent stake in Aer Lingus, over competition issues and commitments over Heathrow slots.

On the attitude of the other key shareholder, Ryanair, Mr Lobbenberg said: "we think Ryanair is ready to monetise its Aer Lingus holding."

The key issue for the Government is the Aer Lingus slots at Heathrow, and whether IAG would continue to use them for Irish traffic or reallocate some of them to potentially more lucrative long-haul routes.

IAG would be expected to outline its plans in tandem with a bid, though stock market rules could make it complicated for it to offer specific concessions to any one shareholder.