Transport Airlines

Ryanair submits formal offer to buy 70.2% of Aer Lingus it doesn’t already own

Jul 17, 2012 4:37 am

Skift Take

Ryanair’s Michael O’Leary may be a poor man’s Richard Branson, but his success where traditional carriers have failed demonstrates that his style of flying is here to stay.

— Jason Clampet

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Ryanair plane tail

Tail wing of a Ryanair plane. Photo by Karen Bryan.

Source: Bloomberg
Author: Chris Jasper

Ryanair Holdings Plc submitted a 694 million-euro ($854 million) bid for Aer Lingus Group Plc after saying last month it would resume a pursuit of its Irish rival.

Europe’s biggest discount airline, which owns 29.8 percent of Aer Lingus, offered to buy remaining stock for 1.30 euros a share in cash, it said today in a statement. That’s a 38 percent premium to the close on June 19, the day before Ryanair stated that it would renew a pursuit blocked by regulators in the past.

Ryanair says the chances of clearing antitrust hurdles have been boosted by mergers among other European carriers, falling traffic in Dublin that leaves room for new entrants and Irish government plans to auction its own 25 percent Aer Lingus stake.

“In six years as a public company, Aer Lingus has failed to deliver value,” Ryanair Chief Executive Officer Michael O’Leary said in a letter accompanying the bid document, adding that the smaller carrier has incurred cumulative losses of 91 million euros during that period.

Aer Lingus traded 1.4 percent higher at 1.07 euros as of 10:52 a.m. in Dublin, where both carriers are based, taking the gain this year to 69 percent. That’s still 23 cents below the offer price and values the carrier at 568 million euros.

Growth Target

Ryanair, which built its stake in 2006 and 2007 and is making the new bid via wholly-owned subsidiary Coinside Ltd., was little changed at 4.14 euros. The company has a market value of 5.96 billion euros and has advanced 14 percent this year.

O’Leary has pledged to help lift Aer Lingus’s annual passenger total to 14 million over five years from 9.5 million today and says his company would also invest in expanding trans- Atlantic flights.

In addition to the bid price, investors would also get a dividend of 3 cents a share announced by Aer Lingus on May 4 that they’re due to receive on July 31.

European Union regulators blocked Ryanair’s bid for Aer Lingus in 2007, saying a takeover would allow the discount airline to dominate 35 routes and control 80 percent of the market in Dublin. Ryanair lost a 2010 appeal of the merger ban.

Ryanair is also facing a full investigation by the U.K.’s Competition Commission of its holding in the smaller carrier after the national regulator said it may lead to higher prices.

Morgan Stanley and Davy Corporate Finance are advising Ryanair and Coinside. Aer Lingus is being advised by Goodbody Stockbrokers, Rothschild and UBS AG.

Ryanair is seeking acceptances for the bid by Sept. 13.

Editor: Dara Doyle. To contact the reporter on this story: Chris Jasper in London at jasper@bloomberg.net. To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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