Aer Lingus rejected IAG takeover approach on value terms

British Airways parent made ‘preliminary’ move last weekend

Aer Lingus said it rejected a takeover proposal from British Airways parent IAG because it "fundamentally" undervalued the airline and its prospects.

In a statement to the Stock Exchange, the board of Aer Lingus noted speculation about a takeover approach and IAG’s confirmation that it was considering a possible offer.

IAG is led by former Aer Lingus chief executive, Willie Walsh.

Aer Lingus said it had received an approach from IAG on December 14th that was “preliminary, highly conditional and non-binding”.

“The board has reviewed the proposal and believes that it fundamentally undervalues Aer Lingus and its attractive prospects. Accordingly, the proposal was rejected on 16th December 2014.”

The airline “strongly advised” shareholders to take no action and noted that there was “no certainty” that a takeover offer would emerge.

Shares in Aer Lingus rose by 15 per cent on news of the approach.

In an earlier statement to the Stock Exchange, IAG said it noted the recent movement in the Aer Lingus share price and confirmed it had “submitted a proposal to make an offer for the company”. It also said there can be no certainty that another proposal or offer would emerge.

The airline group is likely to be eyeing a number of valuable take-off and landing slots at Heathrow that are controlled by Aer Lingus.

Any agreement would need the backing of both the Government, which holds a 25 per cent stake in Aer Lingus and rival Ryanair, which has a 29.9 per cent stake in the airline.

Shares in Aer Lingus settled at €1.986 in Dublin, up 9 per cent while shares in Ryanair were ahead by 2.2 per cent at €9.61.

Aer Lingus said last month it expects 2014 profits to top the €61.1 million surplus generated by its operations last year following a third- quarter performance the airline described as the best since the financial crisis.

The airline reported that operating profit in the three months ended September 30th grew 19 per cent to €112.9 million from €94.9 million during the same period last year.

Ryanair has made three unsuccessful bids to take over Aer Lingus in seven years. As part of a 2012 takeover attempt, Ryanair signed a non-binding memorandum of understanding with IAG to allow British Airways take some of Aer Lingus’s 24 landing slots at Heathrow.

The EU blocked the deal saying it would hurt competition and lead to higher prices passengers.

Meanwhile regulators in the UK last year ordered Ryanair to cut its stake in Aer Lingus to just 5 per cent on the grounds that its shareholding has led or could lead to a substantial lessening of competition between the two on routes between Ireland and Britain.

Charlie Taylor

Charlie Taylor

Charlie Taylor is a former Irish Times business journalist