Business

Aer Lingus bid a 'compelling' offer, IAG tells Ryanair

Willie Walsh Image copyright PA
Image caption Willie Walsh: "I believe Ryanair will see the merit of the case we have made"

The head of airline group IAG has called his company's takeover offer for Aer Lingus "compelling" as it seeks support for the bid from Ryanair.

The Irish government, which owns 25% of the airline, has accepted IAG's €1.36bn (£961m) bid, after receiving promises over jobs and key traffic routes.

However, Ryanair, which owns 29.8% of Aer Lingus, has yet to reveal whether it will accept the offer.

IAG boss Willie Walsh said he was "hopeful" Ryanair would accept.

Although Aer Lingus' shares rose 2.6% on Wednesday, at €2.44 they are below the €2.55 a share offer value. Shares in IAG, which owns British Airways and Iberia, were up 1.4%.

However, IAG boss Willie Walsh said that offer "was the limit".

Mr Walsh said: "We're hopeful that Ryanair will see this as an attractive offer for their stake in Aer Lingus and we will wait to see what Ryanair and the Ryanair board says in response to this."

Mr Walsh said there was a "compelling offer" on the table for its shareholders: "I believe Ryanair will see the merit of the case we have made, the value we are offering in terms of this takeover and will want to see the deal go through."

He added he had not talked to Ryanair in recent weeks.

Image copyright AFP

Last year, Aer Lingus rejected two takeover offers from IAG, saying they undervalued the business.

Ryanair has attempted to buy Aer Lingus three times. Its takeover quest began in 2006, just after Aer Lingus was floated on the stock market by the Irish government.

Ryanair's initial bid illustrates the wild swings in Aer Lingus's value since then. Its first offer was €2.80 a share. The second, two years later, was half that and its most recent offer in 2012 was €1.30 a share.

It was prevented from a full takeover on the grounds it would give it dominance over travel to and from the Republic.

Reassurance

IAG's offer was opposed initially by Irish MPs, who were concerned that services between Irish airports and London's Heathrow might be cut. In February, politicians asked IAG to meet certain guarantees.

Under Tuesday's deal, IAG has now agreed to a legally binding commitment to maintain current services between Heathrow and Dublin, Cork and Shannon for at least seven years.

It has also promised to add two new transatlantic routes next year and 2.4 million more passengers by 2020.

Transport Minister Paschal Donohoe said Aer Lingus did not foresee any compulsory redundancies, adding that the airline could see more than 600 new jobs by 2020.

In a statement, Aer Lingus chairman Colm Barrington said: "This is a compelling transaction for Aer Lingus, its shareholders, its employees, its customers and for Ireland.

"The company will reap the commercial and strategic benefits of being part of the much larger and globally diverse IAG Group."

But Aer Lingus' main trade union, Impact, repeated its view that the deal was bad for workers. A second major union, Siptu, said it wanted further commitments on compulsory redundancies and outsourcing.

'Cast-iron guarantee'

Under the deal, Aer Lingus will continue to operate its international passenger services under the Aer Lingus brand.

The company will also keep Aer Lingus as its registered name and its head office will remain in the Republic of Ireland.

Willie Walsh, who before becoming boss at IAG was chief executive of Aer Lingus, said that "Aer Lingus would maintain control of its brand and operation while gaining strength as part of a profitable and sustainable airline group in an industry that's consolidating".

"Ireland's vital air links to Europe and North America would be enhanced, creating new jobs, with cast-iron guarantees on ownership of Aer Lingus' Heathrow slots."

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