The UK's competition regulator is likely to allow Ryanair to sell its €400 million stake in Aer Lingus to International Consolidated Airlines' Group (IAG), removing a potential roadblock to the Irish flag carrier's sale.
Ryanair owns 29.8 per cent of its rival and could derail IAG’s €1.4 billion bid for Aer Lingus if it refused to sell.
However, it first has to get the UK Competition and Markets’ Authority’s (CMA) approval if it wants to dispose of the stake, as the pair are engaged in a legal dispute.
The Irish airline wants the British supreme court to overturn a CMA ruling that it cut its holding in Aer Lingus to 5 per cent, but until that appeal is dealt with, an authority order banning Ryanair from doing anything with the shares remains in place. Documents relating to the row and recently published by the CMA show the regulator could effectively defer its own procedures if Ryanair was to ask its consent to accept an offer for its Aer Lingus shares.
Flexible
The authority states that the terms of its order are flexible enough to allow its procedures to take “account of actual market conditions such as those that might arise from the current proposal from IAG”.
The CMA is due to appoint a trustee to sell Ryanair’s Aer Lingus shares next month, but it is open to it to postpone this step, or to instruct whoever is appointed to take no action and allow the IAG bid to proceed.
It is understood that once the authority is happy with the bidder and the EU’s competition regulators have given their blessing, it would be unlikely to allow its procedures prevent any offer going ahead. Sources said that the CMA is likely to take a “sensible” approach to IAG’s bid for Aer Lingus.
The authority’s indirect control over Ryanair’s Aer Lingus stake is seen as a potential complication to a deal that has already taken five months to win the backing of the Government, the flag carrier’s other major shareholder.
IAG's general counsel, Chris Haynes, recently urged the CMA not to appoint a trustee and instead permit Ryanair to irrevocably commit to accepting the group's offer for its shares.
Ryanair has already told the CMA that it believes the IAG bid means it is no longer possible for it to appoint a trustee, as this would put the authority in the “invidious position” of determining whether or not Aer Lingus could be sold. It also argues that a trustee could end up having to sell the Aer Lingus stake before other shareholders have decided whether or not to accept IAG’s offer.
IAG chief executive Willie Walsh acknowledged that the group had written to the CMA, but said that ultimately it is up to the Ryanair board to deal with the authority.
Ryanair itself has not commented on either the CMA position or the IAG bid, beyond on saying its board would consider any offer on its merits.
Mr Walsh stressed that he was confident that the airline would seriously consider his group’s deal. “We believe the Ryanair board will give due and careful consideration to the offer,” he said.
Surprise
Speaking on this week’s
Irish Times
business podcast,
David Holohan
, aviation analyst with Merrion Stockbrokers, predicts that Ryanair could surprise people with the speed at which it accepts the IAG offer.
Mr Holohan argues that the airline’s board is likely to take a rational approach to the offer and see that a refusal or delay could ultimately damage the Aer Lingus share price and leave Ryanair facing the prospect of ultimately having to sell the stock for less than the €2.55 offer now on the table.
Ryanair spent some €400 million building up its stake in the first place, but wrote down the value of the investment in its accounts as the Aer Lingus price declined.
The price that IAG is offering means that Ryanair can recover what it spent in the first place. It could potentially return this cash to shareholders.
