Ashley Armstrong, Ben Martin and Ben Marlow, The Daily Telegraph, December 19, 2014
International Consolidated Airlines Group looking to acquire the Irish carrier as Ryanair court battle over its Aer Lingus stake draws to close.
British Airway’s owner IAG has revealed that a secret billion euro plus takeover of Aer Lingus had been rejected by the Irish carrier’s board.
A takeover by IAG, which was created in 2011 through the merger of British Airways and Iberia, would have seen the airline seize even more highly prized take-off and landing slots at capacity constrained Heathrow airport.
Aer Lingus’ board confirmed on Thursday that IAG had made a “preliminary, highly conditional and non-binding approach” last Sunday, 14 December. The company said in a stock exchange statement that it had “reviewed the proposal and believes that it fundamentally undervalues Aer Lingus and its attractive prospects”.
Shares of the airline spiked by 21pc shortly after reports surfaced that IAG was weighing a takeover offer but edged lower to close up 9pc to €1.09 after IAG said that its bid had been rebuffed.
The timing of IAG's interest comes as London's Court of Appeal is expected to make a decision imminently on a protracted battle between Ryanair and Aer Lingus.
Ryanair has been ordered by UK competition authorities to sell down its 29.9pc stake in Aer Lingus to 5pc but Ryanair has challenged the decision several times.
Legal sources believe that Ryanair will lose its appeal again, meaning its last possible recourse in the UK will be the Supreme Court. However, Ryanair's courtroom battle has been likened to delaying the inevitable. A takeover would also require the reduction of the Irish government which holds a 25pc holding in the carrier.
“With Ryanair intent on remaining kingmaker whether or not it can hold onto its block-holder 25pc stake in Aer Lingus, this will once again be Willie Walsh versus Michael O’Leary battle” Neil Shah, director of research at Edison said.
Were a takeover to happen, it would be second time around for Willie Walsh, IAG's chief executive, who ran Aer Lingus from 2001 until joining British Airways in 2005.
His time at the Irish airline included a series of memorable stand-offs with trade unions as he attempted to make Aer Lingus profitable in the wake of the 9/11 downturn in the aviation industry, cutting costs by 30pc and axing more than a third of its staff.
IAG already controls 42 the most landing slots of any other airline group while Aer Lingus is third with 24. However, competition lawyers said that regulators could ask IAG to sell off some of the sought-after landing slots as it previously had to give up 14 of them when it acquired BMI in 2012.
"A rejected takeover offer by Aer Lingus thwarts both a move to gain additional runway slots at Heathrow, along with opportunity for IAG management to apply additional industry cost efficiencies", Keith Bowman at Hargreaves Lansdown commented. "Prior acquisitions of both British Midland and Iberia have served IAG well, with the airline potentially placing further pressure on rivals Lufthansa and Air France", he added.
Aer Lingus, which has been repositioning itself as a budget long haul carrier, has undertaken a turnaround plan under chief executive Christoph Mueller and in November posted its best third quarter result since the credit crunch.
Mr Mueller announced in July he would step down from the company next May to lead a revamp of stricken Malaysia Airlines after returning the Irish carrier to profitability.
This article was written by Ashley Armstrong Ben Martin and BEN MARLOW from The Daily Telegraph and was legally licensed through the NewsCred publisher network.