Ryanair Holdings Plc (RYA) submitted a 694 million-euro ($854 million) bid for Aer Lingus Group Plc (AERL) after saying last month it would resume a pursuit of its Irish rival.
Europe’s biggest discount airline, which owns 29.8 percent of Aer Lingus, offered to buy the remaining stock for 1.30 euros a share, it said today in a statement. That’s a 38 percent premium to the close on June 19, the day before Ryanair stated that it would renew a pursuit blocked by regulators in the past.
Ryanair Chief Executive Officer Michael O’Leary reckons the chances of clearing antitrust hurdles have been boosted by mergers among other European carriers, falling traffic in Dublin that leaves room for new entrants and Irish government plans to auction its own 25 percent stake in Aer Lingus.
“O’Leary seems to really have the bit between his teeth on this,” said John Strickland, director of JLS Consulting in London. “It would be a big strategic step and one of those things he’d like to do before he leaves. But it will still be extremely challenging to make any headway with the regulators.”
Aer Lingus traded 1.2 percent higher at 1.07 euros as of 12:05 p.m. in Dublin, where both carriers are based, taking the gain this year to 68 percent. That’s still 23 cents below the offer price and values the carrier at 567 million euros.
Ryanair, which built its stake in 2006 and 2007 and is making the new bid via wholly-owned subsidiary Coinside Ltd., was little changed at 4.13 euros. The company has a market value of 5.94 billion euros and has advanced 14 percent this year.
O’Leary has pledged to lift Aer Lingus’s annual passenger total to 14 million over five years from 9.5 million today and says Ryanair (RYA) would invest in expanding trans-Atlantic flights.
“In six years as a public company, Aer Lingus has failed to deliver value,” the CEO said in a letter accompanying the bid document, adding that the bid represents “excellent value” given the smaller airline’s cumulative loss of 91 million euros during that period.
Ryanair is seeking acceptances for the bid by Sept. 13. In addition to the offer price, investors would also get a dividend of 3 cents a share announced by Aer Lingus on May 4 that they’re due to receive on July 31.
European Union regulators blocked Ryanair’s bid for Aer Lingus in 2007, saying a takeover would allow the discount airline to dominate 35 routes and control 80 percent of the market in Dublin. Ryanair lost a 2010 appeal of the merger ban.
Ryanair is also facing a full investigation by the U.K.’s Competition Commission of its holding in the smaller carrier after the national regulator said it may lead to higher prices.
Morgan Stanley (MS:US) and Davy Corporate Finance are advising Ryanair and Coinside. Aer Lingus is being advised by Goodbody Stockbrokers, Rothschild and UBS AG. (UBSN)
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