Low-cost carrier Ryanair has announced its intention to make an all-cash offer of €1.30 (US$1.65) per share for the entire share capital of fellow Irish carrier Aer Lingus, valuing the company at €694 million ($880m).
The announcement comes only days after Ryanair “welcomed” the decision by the UK Office of Fair Trading (OFT) to refer its existing 29.82% stake in Aer Lingus to the UK Competition Commission for review.
The offer will be made through Ryanair’s wholly-owned subsidiary Coinside Limited. Ryanair has stated that its valuing represents a 38.3% premium over Aer Lingus’ closing share price yesterday (June 19), and a 46.7% premium over the last six months.
Ryanair claims that the European air transport market is “inexorably” consolidating into five large airlines – Air France, British Airways, easyJet, Lufthansa and Ryanair – and that its acquisition of Aer Lingus would best secure the Irish flag carrier’s future by reducing its fares and costs and “reversing its recent traffic decline”.
Since its unsuccessful bid for Aer Lingus in 2006, Ryanair believes that its new offer should be approved by competition authorities in light of other recent airline mergers, such as British Airways’ merger with Iberia to create IAG, and subsequently the acquisition of British Midland (BMI). The statement also read that: “Aer Lingus remains a sub-scale, peripheral EU carrier which has no long-term independent future.”
Other reasons given by Ryanair for the offer include available capacity at Dublin Airport and the Irish Government’s recent announcement that it would sell its 25% stake in Aer Lingus. It also asserts that, were its bid successful, Aer Lingus “will continue to be owned and managed in, as well as focussed upon, Ireland.”
Commenting on this “significant opportunity”, Ryanair’s CEO Michael O’Leary said: “[The offer] enables Aer Lingus to secure a financially strong, Irish-based airline partner committed to keeping Aer Lingus as a separate airline, while developing the Aer Lingus brand and business. Ryanair believes this offer will ensure that Ireland will have two separate airlines in one strong airline group, with combined traffic of almost 90 million passengers per annum, capable of growing Aer Lingus’ traffic and creating new jobs for pilots, cabin crew and engineers within a dynamic and expanding airline.”