(Updates with comment from analyst in fourth paragraph.)
Oct. 12 (Bloomberg) -- Aer Lingus Group Plc, Ireland’s second-biggest airline, said it will seek approval from shareholders to cancel up to 500 million euros ($690 million) in non-distributable reserves to give it the flexibility to return cash to shareholders.
Aer Lingus, which may post a profit for a second straight year, is under pressure from Ryanair Holdings Plc, its largest shareholder, to return cash to investors. Ryanair holds 30 percent of Dublin-based Aer Lingus’s stock following two failed takeover bids.
The proposed balance-sheet restructuring could pave the way for Aer Lingus to pay a special dividend within a range of 50 million euros to 100 million euros as soon as next year, said Joe Gill, an analyst at Bloxham Stockbrokers in Dublin.
“With such huge cash balances on the balance sheet, you can envisage a scenario of that being how they reward shareholders,” if the company remains profitable and barring major aircraft purchases, Gill said in a phone interview.
Aer Lingus fell 2.8 percent to 65 cents at 10:40 a.m. in Dublin. The carrier’s stock has tumbled 40 percent this year, cutting its market value to 344 million euros, amid concern that waning economic growth will crimp travel demand.
‘Hard to Defend’
“While the board is not currently contemplating the payment of a dividend to shareholders or the redemption or repurchase of ordinary shares, the board believes that it is in the best interests of shareholders to enable the company to have greater flexibility to consider a return of capital to shareholders,” Aer Lingus said on its website.
“It’s very hard to defend that a special dividend isn’t the way to reward shareholders given the state of the company,” Gill said.
The carrier will hold an extraordinary general meeting in Dublin Nov. 4 to vote on the capital reduction.
Ryanair responded to the Aer Lingus statement by publishing an open letter to Chairman Colm Barrington urging him to reply to a Sept. 28 message in which the carrier outlined its proposals to reverse the collapse of the company’s share price. Ryanair asked Aer Lingus to consider a 110 million-euro special dividend.
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