Ryanair likely to raise Aer Lingus offer, Merrion says


Ryanair will raise its €750 million offer for rival Irish airline Aer Lingus in January, and that could move shareholders to accept it, analysts at Merrion Capital said today.

Ryanair has said repeatedly that its offer of €1.40 per share was generous and it was confident of its success, but holders of only 0.01 per cent of Aer Lingus shares accepted it by an initial January 5th deadline, which Ryanair extended to February 13th.

Ryanair was not immediately available for comment on the Merrion note.

Aer Lingus has said the offer undervalued it and could not go through. "We believe Ryanair's intent is serious and that it will raise its offer - and will do so before the last date for amending its offer, January 30th," analysts at Merrion said in a research note.

"In that event, we would expect ordinary Aer Lingus shareholders to urge their board to engage meaningfully with the bidder, as Ryanair is likely to be precluded from returning for 12 months if its offer lapses," Dublin-based Merrion said, maintaining a "Buy" recommendation for Aer Lingus stock.

Shares in Aer Lingus were up 1.2 per cent at €1.58 at 1.40pm and have traded above the Ryanair offer price since December 5th, four days after Ryanair's offer, which it made at half the price of an earlier failed bid in 2006.

Ryanair, which already owns almost 30 percent of the former state airline, said its offer represented a 28 percent premium over Aer Lingus shares' average closing price for the 30 days to Nov. 28, the last trading day before the offer.

"Ryanair's offer price of €1.40 per share for Aer Lingus is clearly not high enough," Merrion said.

"We believe that an offer price would have to be at least within the €2.07 to €2.67 range to have a realistic chance of engaging the target board in meaningful discussions.

The Government and Aer Lingus employee group ESOT, which own 25 and 14 per cent of Aer Lingus, respectively, and which rejected Ryanair's 2006 offer, have not published their intentions this time.

Unions at Aer Lingus are opposing the offer. "A more realistic offer price from Ryanair will force the government to clarify its stance on non-price issues," Merrion said.