Aer Lingus pilots have been cautioned by the Minister for Social Welfare and Family Affairs, Séamus Brennan, against using their pension fund to resist a Ryanair takeover of their company.
Last week, The Pensions Board wrote to the trustees of the Aer Lingus pilots pension scheme. It is understood it reminded the trustees they must invest with due regard to potential return.
Yesterday, during an interview with TV3's The Political Party programme, Mr Brennan said: "Pension funds have trustees; it's the job of the trustees to act on behalf of the pensioners, not to have any other objective.
"If in that case [ the purchase of Aer Lingus shares] their objective is to protect their pensioners and to make sure that their pensioners have decent income in years to come, fine. If it's their objective, on the other hand, to get into some power play as to who owns the airline and that's their main objective, then I would caution against that."
Mr Brennan is the Government Minister with responsibility for pensions. The Taoiseach, Bertie Ahern, was asked yesterday what assurances he could offer Aer Lingus would not be taken over by Ryanair. "The percentages speak for themselves," he said.
"What is vitally important for us is that the strategic plans for the future are delivered on. We have made it absolutely clear that the Government will not sell our share, so the takeover of Aer Lingus is not something I think will happen."
Meanwhile, the Aer Lingus Employee Share Ownership Trust (Esot), which holds shares in the airline on behalf of staff, has upped its stake in the carrier by exercising an option it agreed with the Government in September.
The Esot has exercised an option to buy 15.5 million shares at €2.20 each from the Government. The original intention was for the Esot to purchase shares through a long-term profit sharing arrangement. The Takeover Panel approved this arrangement last week.
The decision, which costs the Esot about €34 million, will lift the Esot's holding in the airline to about 12.5 per cent. On top of that, individual staff members are believed to have almost 2.5 per cent of the equity, bringing the total staff shareholding to close to 15 per cent.
A statement from the Esot failed to explain how the share purchase was funded or what the long-term intentions of the Esot were. One likely course for the Esot is to use its enlarged shareholding to purchase more shares in Aer Lingus and effectively block the Ryanair bid. The Esot could do this by leveraging its current shareholding and using it as collateral. With the share price of Aer Lingus in such flux, this course of action could be very risky.
Meanwhile, a number of international hedge funds and institutional investors have purchased stock in Aer Lingus above the Ryanair offer price of €2.80 a share and will incur large losses if they accept the current offer.
Dexia Asset Management, the French-Belgian fund, snapped up 5.4 million shares in the last fortnight for approximately €16 million, purchased at €2.90 a share.
