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IAG Gets Government Nod to Buy Aer Lingus

Published on May 26 2015 10:09 PM in General Industry tagged: Featured Post / Aer Lingus

IAG Gets Government Nod to Buy Aer Lingus

British Airways-parent IAG won backing from the Irish government to proceed with its €1.4 billion takeover of Aer Lingus Group to enlarge the airline group and bolster its lucrative trans-Atlantic network.

IAG won government support after the group “provided additional information and certain commitments in relation to its proposal,” according to a release on Tuesday following a cabinet meeting.

IAG said it agreed with the independent directors of Aer Lingus on the offer, which consists of €2.50 in cash for each share, and five cents as a cash dividend.

“We have very carefully considered all of the issues involved and have concluded that supporting IAG’s offer is in the best interests of the airline, its employees, the travelling public, job creation and the economy overall given the vital role that air access plays in our economy as an island nation,” Irish Trasport Minister Paschal Donohoe said in the statement. The Irish government holds a 25 per cent stake.

 The deal comes three months after the state rejected the airline’s indicative bid as it held out for more commitments on jobs and routes.
Chief Executive Officer Willie Walsh, who began his career as a pilot at Aer Lingus, went on a charm offensive to calm concerns and negotiate with government representatives, and IAG said today that Aer Lingus will retain its slots at Heathrow and will keep operating its key flights linking Ireland and the UK hub for at least seven years.
One key variable in clinching the deal remains Ryanair, the Irish low-cost carrier that is Aer Lingus’s largest shareholder after itself attempting several unsuccessful takeovers of the smaller local rival. IAG said its offer is conditional, among other things, on at least 90 per cent of Aer Lingus shareholders accepting the bid.Ryanair said that it has yet to receive an offer, and that it will consider any proposal on its merits. The company owns 29.8 per cent of Aer Lingus.

Speaking to reporters in Dublin on Tuesday evening, Donohoe said he would take the proposed sale for debate in parliament the next day, as some lawmakers continued to express misgivings. He didn’t say when a vote would take place.

IAG has said it won’t sell without a commitment from both the government and Ryanair. Ryanair Chief Financial Officer Neil Sorahan said in London on Tuesday that the company remains open to discussing an offer and relishes competition.

“There has never been more competition in Ireland than there is at the moment,” Sorahan said. Aer Lingus’s brand will remain protected, and its head office will be in Ireland, according to the government.

Adding Aer Lingus to IAG, known in full as International Consolidated Airlines Group, enlarges the group with a fourth component, after British Airways merged with Iberia of Spain and later added discount specialist Vueling. Walsh has managed to tighten the performance at the Spanish subsidiaries with thousands of job cuts and a more integrated route network.

Walsh managed to pull the Aer Lingus deal from the brink by highlighting the potential to create job and use Aer Lingus as a natural gateway on trans-Atlantic routes, the most profitable component of British Airways’ business.

“This access to greater global scale will accelerate growth across our network, enhance Ireland’s position as a natural gateway connecting Europe and North America, give Irish tourism access to major traffic flows and customer loyalty programs and provide better access for business interests and to cargo flows,” Aer Lingus said in a separate statement.

News by Bloomberg, edited by ESM
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