It has seemed like the takeover bid that would never end and, even at the last minute, contacts on redundancy guarantees and toing and froing with backbenchers led to one final delay.
IAG made its initial bid for Aer Lingus more than six months ago and has been locked in discussions with a Government-appointed committee since February on the basis of a third bid of €2.55 a share.
Finally, yesterday evening, the Cabinet gave the green light, though there is still a road to travel before the takeover goes through.
Generally takeover bids rest on one thing – price.
However, IAG boss Willie Walsh would have been well aware as he launched the bid that he faced a more complex picture. In addition to offering a price that would win acceptance from the airline’s disparate group of owners, he knew IAG had to persuade one key shareholder – the Government – that the bid was in the wider national interest.
Cash pile
A few years ago, the State was pressed for cash and would have been under financial pressure to accept a deal to get its hands on the money. Now, with the ability to raise money on the markets at super-low interest rates and a cash pile of €20 billion-plus, the Government will welcome the cash it will get for its stake, but it will make no major difference to the national finances.
It was clear from day one that the Government’s decision would be based on what the deal meant for connectivity and also on its perception of what the political impact would be.
The interface in these talks was an expert committee appointed by Minister for Transport Paschal Donohoe and comprised of senior civil servants and investment and legal advisers. The agreement to sell the Government stake was based on a lengthy document outlining in detail IAG commitments on the Heathrow slots, the future of the Aer Lingus brand and jobs at the airline.
Part of the delay in finalising a deal was based on the detail and the associated technical and legal complexity. In particular, the Government wanted legally watertight assurances on the Heathrow slots for longer than the original five-year term suggested by IAG and also a mechanism to allow it to veto the sale of these slots at any future date.
A mid-point of about seven years was eventually agreed, but work was needed to ensure that the agreement to give a veto to the Government on the sale of the slots was within EU state aid rules. This appears to have been clarified only in recent weeks.
Formalised
IAG will also have been trying to establish that Aer Lingus’s biggest shareholder, Ryanair, would sign up to the deal. Ryanair has said it will consider the offer when formalised – should it accept that the deal will almost certainly go through.
It also needs competition approval from the EU Commission, which will complete an initial examination in 35 days, and the acceptance of the bulk of the remaining company shareholders.
Over the past month, a number of the main issues finally fell into place. The key points in dispute between the Government and IAG were sorted out. The European Commission took a positive view on the slot-guarantee mechanism and is not expected to have any major objections on competition grounds.
Contacts continued with the unions, though it was only yesterday that Aer Lingus chief executive Stephen Kavanagh confirmed in a letter to Mr Donohoe that no compulsory redundancies or outsourcing of activities were anticipated.
After considerable coming and going with Coalition backbenchers – particularly Labour TDs from north Dublin – the Government agreement to sell its shares was finally announced.