Ryanair has confirmed its third attempt to buy rival Aer Lingus, valuing the airline at €694 million.
Ryanair’s offer is worth €1.30 per share, or a 38% premium over the closing price on June 19. Ryanair claims the deal is vital as Aer Lingus has failed to find a partner in an increasingly consolidating market. In its offer document, Ryanair says “ that as a consequence, Aer Lingus remains a sub-scale, peripheral EU carrier which has no long term independent future”.
Ryanair plans to become one of the “big five” European airline groups if successful in the deal. It says this group will also comprise Air France/KLM, the International Airlines Group, Lufthansa group and Easyjet.
It is possible that the bid will trigger a rival offer. Etihad has recently moved closer to Aer Lingus after purchasing a 3% stake, although European Union rules mean it cannot take a controlling interest as a foreign investor.
Ryanair said it was willing to offer “appropriate remedies” to appease Europe’s regulators which ruled out an earlier bid by Ryanair for its rival in 2006 on competition grounds. Ryanair’s bid this time is different in that it does not require its own shareholder approval as unlike the previous occasion, acquiring Aer Lingus would not utilise more than 25% of its gross assets.
Aer Lingus currently carries 9.5 million passengers, a fall of 900,000 since 2009. Ryanair claims it will grow this to more than 14 million by 2017. One possible motive for Ryanair would be the acquisition of Aer Lingus’s transatlantic traffic rights, which it could use to launch its long-awaited budget transatlantic services.
Ryanair currently owns 29.82% of Aer Lingus’ shares, with the Irish government holding a key 25% stake. Ryanair’s turnover is nearly four times that of Aer Lingus at €4.325 billion, with profits of €503 million, compared to Aer Lingus’s €84 million.