In January of this year IAG made the third of three firm offers for Irish airline Aer Lingus at €2.55 ($2.78) per share. Unlike the previous offers, this was received more favourably by Aer Lingus, but was once again conditional upon on IAG obtaining support for the offer from the carrier’s two key shareholders: Ryanair and the Irish government. As it currently stands, the offer is worth €1.4bn ($1.5 bn). Late on Tuesday Aer Lingus signed a transaction agreement which “contains certain assurances” for the future security of Aer Lingus where IAG has given “cast-iron guarantees” on Aer Lingus’ London Heathrow slots which will be protected by a single B share held by the Irish government. Aer Lingus will maintain its level of seasonal flights to Cork, Shannon, and Dublin for at least seven years and additional Heathrow-Ireland links for a minimum of five years. It is understood that Aer Lingus will now convene an EGM to approve the connectivity resolutions.
IAG said: “The independent Aer Lingus directors intend unanimously to recommend that Aer Lingus shareholders accept the offer. The government of Ireland has stated that it supports the offer and the minister for finance of Ireland has confirmed that the general principles of the disposal of his shares in Aer Lingus will be laid before Dáil Éireann [the lower house of the Irish Parliament] for approval.” Earlier in the day Ryanair said it would wait for a formal approach from IAG, indicating that they would consider any deal based on its merits. The offer document is expected to be sent to shareholders within 28 days. However, for the offer to be met with success, it has to be backed by at least 90% of Aer Lingus’ shareholders meaning, of course, that Ryanair’s buy-in will become critical. The offer will need to obtain competition clearance from the European Commission. Aer Lingus chairman Colm Barrington and IAG CEO Willie Walsh have described the deal as “compelling,” especially as it will provide stronger transatlantic and regional connections for both IAG and Aer Lingus. “The company [Aer Lingus] will reap the commercial and strategic benefits of being part of the much larger and globally diverse IAG Group,” confirmed Barrington.
Speaking during an analysts’ briefing on Wednesday morning, Willie Walsh made it clear that the Aer Lingus brand and its Irish head office would remain in place. IAG intends to develop Dublin as a transatlantic hub and Aer Lingus will subsequently be able to re-join the oneworld. “Aer Lingus would add a fourth competitive, cost effective airline to IAG, enabling us to develop our network using Dublin as a hub between the UK, continental Europe and North America, generating additional financial value for our shareholders,” Walsh commented.
The offer has actually been made by a specially created company for the acquisition, AERL Holding, which is wholly owned by IAG, the directors of which will be Walsh, IAG CFO Enrique Dupuy, and IAG General Counsel Chris Haynes.
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