Aer Lingus has called on shareholders to reject Ryanair’s bid for the business, saying the offer from its rival “seriously undervalues” the airline.
Ryanair yesterday submitted a formal bid of €694 million for Aer Lingus after saying last month it would resume a pursuit of its rival. The airline, which already owns 29.8 per cent of its rival, has offered to pay €1.30 a share in cash for the remaining stock.
Under takeover panel rules Ryanair had to submit that offer to shareholders today.
In its response, Aer Lingus said the gross cash on its balance sheet would more than pay for Ryanair’s offer, and it currently represented a 31 per cent discount to gross cash per share of €1.87.
Aer Lingus said it did not believe the offer was in the best interests of shareholders.
“Aer Lingus is a robust and profitable airline with a proven business model, a strong balance sheet and an internationally recognised brand,” the airline said in a statement.
“[The] board’s unanimous view is that Ryanair’s offer to acquire control of Aer Lingus for €1.30 per share fundamentally undervalues Aer Lingus and represents a significant discount to the intrinsic value of the business.”
The EU previously blocked Ryanair’s bid for Aer Lingus in 2007, saying a takeover would allow the discount airline to dominate 35 routes and control 80 per cent of the market in Dublin. The airline lost a 2010 appeal of the merger ban.
Aer Lingus said it was not a credible offer as its legal advice was that it was unlikely the new bid would get approval at a European level.
Ryanair is also facing a full investigation by the UK’s Competition Commission of its holding in the smaller carrier after the national regulator said it may lead to higher prices. This morning, Aer Lingus said the regulator would likely require Ryanair to sell down its stake.
However, Ryanair said its chances of clearing competition hurdles has been boosted by mergers among other European carriers, falling traffic in Dublin that leaves room for new entrants and Government plans to auction the 25 per cent stake it holds in Aer Lingus.
Minister for Transport Leo Varadkar yesterday said the Government is not ruling out Ryanair’s bid for its stake in Aer Lingus, but was under no obligation to respond for 60 days.
“I’m a little bit restricted in what I can say because of the rules of the Irish takeover panel. The Government is considering the offer but we’ll have to take into account a number of things,” he said.
Mr Varadkar said the Government would consider what was best for the taxpayer in terms of price and what was best for the passenger in terms of “competition and connectivity and cargo”.
The airline said the board would write to shareholders outlining its reasons for rejecting the offer within the next 14 days.
