Plenty of poker faces over fate of Aer Lingus

 

ONE MORE THING:IT SHOULDN’T come as a surprise that the board of Aer Lingus and the Minister for Transport Leo Varadkar are at one in expressing the view that Ryanair’s €1.30-a-share bid for its rival “undervalues” the airline. It’s rare that a company subject to a hostile takeover believes that the price offered is generous.

The State, meanwhile, wants the best price it can get for its 25 per cent stake, which is for sale.

The irony is that Aer Lingus, backed by the Government, turned down two higher bids from its rival – €2.80 a share in 2006 and €1.40 a share in 2008.

In both cases, no bid would have been enough to receive their support. Ryanair was rebuffed, primarily over competition issues but also because no one at Aer Lingus wants to work for Michael O’Leary.

Varadkar spoke yesterday of the bid undervaluing Aer Lingus.

This is somewhat curious given that he previously indicated that he wanted at least €1 a share for its stake, when the shares were trading below that level.

O’Leary’s bid offers a 30 per cent premium to that level.

Varadkar hasn’t ruled out accepting Ryanair’s offer, citing the need to consult with his Cabinet colleagues when they meet next Tuesday.

This is like a game of poker. Varadkar probably doesn’t want to sell the State’s holding to Ryanair but he does want to keep it in the game in the hope that it might put up the share price further and flush out another party, be it Etihad or someone else.

Meanwhile, Aer Lingus chief executive Christoph Mueller must have mixed views on the bid.

On the one hand, he has joined the board in rejecting O’Leary’s offer. On the other, Ryanair’s bid might help him net a tidy windfall.

Ryanair’s offer pushed Aer Lingus’s share price up to €1.05 by the close of trading yesterday from 94 cent on Tuesday evening, just before O’Leary made his move. Under a stock options scheme agreed before he joined the airline in September 2009, Mueller is entitled to an award of 500,000 Aer Lingus shares on September 7th if the price has been above €1 for 25 of the prior 40 days.

This seems likely if the Ryanair bid remains live to that point.

The exercise price is 57.3 cent a share. Based on yesterday’s closing price, this would give Mueller a paper profit, before tax deductions, of €213,500.

Varadkar’s flying visit as Shannon future up in air

THE FUTURE shape of the new Shannon airport, which is to be separated from the Dublin Airport Authority and will incorporate the landbank from Shannon Development, might become clearer next week at a two-day conference hosted by the two Shannon entities at Dromoland Castle in Co Clare.

The second annual Irish Business Aviation Convention on June 27th and 28th will ponder how Shannon Airport might strengthen its role in the global aviation sector.

Minister for Transport Leo Varadkar will give the keynote address on day two, although whether he can shed any light on the Government’s thinking remains to be seen.

Two task forces have been set up by the Government to make recommendations on the future structure of aviation development in the region and economic development following the decision to break up Shannon Development.

They will feed their recommendations into a steering group comprising senior civil servants across five departments, who will take proposals to Varadkar and Minister for Enterprise Richard Bruton for consideration.

One area likely to be considered is private jets. More than 4,500 jets went in and out of Shannon last year, which was up on 2010.

“Our plan now is to build on this and broaden Shannon’s role as a potential business aviation hub,” its director Mary Considine said this week.

This sounds like a good idea, although Shannon will also surely have to find ways to reverse the collapse in passenger airline traffic, which has slumped from 3.6 million in 2007 to 1.6 million last year.

Tonic for Davy’s clients as Boots investment pays off

THE RECENTLY ANNOUNCED deal between US drug store chain Walgreen with pharmacy group Alliance Boots should provide a welcome tonic for about 100 private clients of Irish stockbroker Davy.

The Davy clients invested in Boots when it was privatised in 2007 and now stand to make a return of 150 per cent on the initial transaction, which involves Walgreen’s taking a 45 per cent equity stake for $6.7 billion in cash and stock.

Further returns are on the cards if Walgreen acquires the remaining 55 per cent for about $9.5 billion in three years time.

Davy clients have also netted windfalls lately in relation to investment in Azur pharmaceuticals, Facebook and LinkedIn.

Davy has been busy of late. It took over the asset management and private clients divisions of Bloxham Stockbrokers before that firm collapsed recently. It also put on its green jersey to advise the Government on the sale of the national lottery licence for a knockdown fee of just €615.

In addition, Davy sold just over three million shares in ferry operator Irish Continental Group on behalf of heavily indebted investment group One51 in recent days. I’m told the placement with international investors yielded €43 million for One51, which plans to use the money to pay down debt.

One51 had debts of €146 million at the end of June 2011, mostly built up during Philip Lynch’s time in charge of the business when it went on a costly acquisition spree.

Before the share sale, One51 banked the final dividend of 67 cent a share paid by ICG on June 22nd, which amounted to €2.05 million for the investment group.

Some little things

AS IRISH WATER slowly takes shape under the wing of State-owned energy group Bord Gáis, Eoghan Ó Neachtáin has been recruited as head of public affairs. His role will involve engaging with local authorities as the company moves towards implementing metering across the country. He will report to Larry Donald, group corporate affairs director at Bord Gáis.

Ó Neachtáin was government press secretary in the last Fianna Fáil-Green Party administration and retained this role for the first 100 days after Fine Gael and Labour came to power. He formerly worked for ESB in a senior communications role and often pops up as a pundit on TG4’s rugby coverage.

ABU DHABIairline Etihad has appointed Dave Walsh as its new country manager for Ireland. He previously held a similar role here with BMI and starts with Etihad on August 8th. Walsh is currently country manager for Ireland at Travelport.

A NOVEL SOLUTIONto the euro crisis came yesterday from BNY Mellon’s research team – remove Germany from the currency union.

“It seems clear that Germany has won few friends within southern Europe over the past few years,” BNY said. “Hence, many might feel that, without Germany, the remaining members of the euro zone could not only regain much of the competitiveness they have lost over the past decade but also make a meaningful push towards fiscal union.”

Is this a likely outcome? “Probably not,” mused BNY. “Nevertheless, after two and a half years of piecemeal solutions, the nations of the euro area and their central bank need to start thinking about the way to solve this in an elegant and meaningful fashion.” Hear, hear.

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