Offers To Buyout State Airline For $1.9 Bil
It appears Ryanair
wants to keep it all in the family. In a surprise move, the Irish
low-cost, no-frills carrier made a bid Thursday for the other Irish
airline... state-owned Aer Lingus.
Aer Lingus opted for privatization as a way to generate funds
for a $2.5 billion expansion of its long-haul fleet. To date,
Ryanair's executives haven't shown any interest in serving a
long-haul market... but they revealed Thursday Ryanair has already
bought 16-percent of Aer Lingus.
Apparently, it wants the rest of Aer Lingus pretty badly.
Ryanair offered $3.50 a share... nearly 75 cents more than Aer
Lingus' share price, and a total offer of $1.9 billion dollars.
The Washington Post reports, however, that Aer Lingus Chairman
John Sharman says the airline's board has unanimously rejected
Ryanair's hostile takeover attempt.
"This approach is unsolicited, wholly opportunistic and
significantly undervalues the group's businesses and attractive
long-term growth potential," Sharman said. "In addition, the offer
would raise significant regulatory issues as a result of Aer Lingus
Group's strong position in its core markets."
Ryanair CEO Michael O'Leary says he sees no insurmountable
problems with EU rules on competition, which are similar to US
anti-trust laws. Aer Lingus' labor unions, however -- who are part
owners of the airline -- oppose privatization, and this deal
especially. O'Leary won't deal with unions for Ryanair.
That doesn't necessarily count Ryanair out, though... as the
door is still open for the airline to up its offer. O'Leary stated
earlier Thursday the airline has as much as $2.6 billion in cash
reserves it may use to outbid other interested suitors, such as
British Airways -- whose CEO, Willie Walsh, once ran Aer
Lingus.
Ryanair also hopes to placate concerned employees by stating Aer
Lingus would continue to operate with its current management and
staff. O'Leary says Ryanair could help Aer Lingus with cost
control, and increase it buying power for new planes.
"We believe it's a unique opportunity to put the two leading
Irish airlines together into one strong group that would be able to
compete with Europe and the world," O'Leary said in an
interview.
Ryanair also hopes to benefit from Aer Lingus' superior earnings
yield. Regardless of who purchases the airline, the Irish
government still retains 28-percent of Aer Lingus... with no plans
to sell.
If the deal goes through -- a big "if" at this point -- a
combined Ryanair/Aer Lingus conglomeration would handle some
50-million pax per year. And that places them on a par with other
massive alliances... such as Air France-KLM.