THE BOARD of Aer Lingus yesterday rejected a new offer from Ryanair to buy the airline, following an emergency meeting of its board of directors.
Ryanair offered €1.40 a share for its rival, valuing Aer Lingus at €748 million. This is a premium of about 28 per cent to Aer Lingus's share price last Friday, but half what Ryanair offered when it last made a swoop for its rival in late 2006. That was just weeks after the former State-owned airline was floated on the stock markets in Dublin and London.
"The board rejects this new offer and Aer Lingus shareholders are strongly advised to take no action in relation to the offer," a statement from the board of Aer Lingus said.
"Aer Lingus remains a strong business with significant cash reserves and a robust long-term future. The board believes that the offer significantly undervalues Aer Lingus."
Ryanair said it would operate Aer Lingus as a separate company, with its own brand and its own management and staff. It said it would guarantee the slots at Heathrow for services to Cork and Dublin.
"This is something that no other prospective purchaser would guarantee to do," Ryanair chief executive Michael O'Leary said at a press conference in Dublin yesterday.
Ryanair has pledged to double Aer Lingus's fleet to 66 aircraft and create 1,000 new jobs at the airline over the next few years.
Ryanair's last bid for Aer Lingus was opposed by the airline's board, its trade unions and the Government. It was rejected on competition grounds by the European Commission in July 2007, a decision that is under appeal by Ryanair.
Minister for Transport Noel Dempsey said the Government's aviation policy was that passengers should have competition in terms of service provision.
"The Government has the shares in Aer Lingus for strategic reasons," he told RTÉ Radio yesterday. "One of the strategic reasons was to ensure that Aer Lingus held on to the slots at Heathrow. We also wanted to prevent hostile bids."
But the Minister said he would await the full details of Ryanair's offer before making a decision. The Government would earn €187 million by selling its 25 per cent stake .
Mr O'Leary admitted yesterday that Ryanair would be buying its rival for practically nothing if its bid succeeded. Aer Lingus has about €800 million in cash, has valuable landing slots at London's Heathrow Airport and a young fleet of aircraft.
"It's a loss-making airline and those reserves will reduce over time," he said.
Trade union groups lined up in opposition to Ryanair's latest bid.
"We will be calling on the Government and the EU competition commissioner, Nellie Kroes, to ensure competition and strategic connectivity are preserved for the Irish people," said Siptu's national industrial secretary, Gerry McCormack.
Impact, which represents cabin crew, is also opposing the offer and questioned whether 1,000 jobs would be created at Aer Lingus as proposed by Mr O'Leary. "There is no indication that any new Irish jobs would be created," the union said.
Ryanair's offer found support from at least one Aer Lingus shareholder. "As [2 per cent] shareholders, we highly recommend the management seriously consider Ryanair's offer and any other offers which may materialise," said Nigel Hart, a partner with ReachCapital Management.
Aer Lingus is believed to have appointed investment bank Goldman Sachs in London and Dublin-based stockbroker Goodbody to advise on its defence.
Analysts speculated last night that a counter-offer might emerge with Air France-KLM, which owns Irish airline CityJet, tipped as a potential rival suitor. "Air France would be the screaming candidate," said one Irish analyst. "I'd be surprised if they don't have a look."
