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The share price of Aer Lingus (LSE:AERL) rose sharply this morning following an announcement that the airline is considering a takeover offer from International Consolidated Airlines Group (LSE:AIG). While AIG’s interest in Aer Lingus is not news in the sense that it is new, it is headline-worthy in that both companies issued regulatory statements affirming the current proposition, which is the third proposal for the venture.
Investors seemed to react positively as shares rose from Friday’s close at 2.355 to open at 2.40. Shares continued to rise in early trading to 2.44, before gradually falling throughout the day to close at 2.365, up 0.42%, but still well short of the €2.55 per share that IAG is offering.
Similarly, shares of IAG took off, opening down 2.5 points before rising to a high of 567.50, the highest IAG shares have been since January 2007. IAG’s price did not taper off until later in the day, when it fell to 549.00 as the trading day ended., up 2.43% from Friday’s close of 536.00.
Investor sentiment in the proposed takeover is certainly not tepid in contrast to the London Exchange overall as indicated by the 0.29% increase in the FTSE 100 and the very modest 0.07% in the 250.
The problematic issues appear to have less to do with the boards of the two companies, although their acceptance of the offer is not yet certain, so much as they have to do with regulatory issues and, in particular, the Irish government, which is a 25% stakeholder in Aer Lingus, and Ryanair, which owns a 30% stake.
Included in IAG’s remarks was a cautionary statement that said, “There can be no certainty that any further proposal or offer will be forthcoming.” Aer Lingus’ statement contained a similar remark with, perhaps, a little stronger admonition, “There can be no certainty that any offer will be made nor as to the terms of any offer. Shareholders are strongly advised to take no action.” That just goes to show you that speculators in investors’ clothing have less regard for cautionary statements that long term investors – a point that I have made repeatedly over the past three years.
The offer by IAG, the owner of British Airways and Iberian Airlines, is a strategic move to protect its slots at Heathrow. If the deal were to be consummated, the group would account for 56% of flights arriving and departing at the UK’s largest airport and for 51.6% of the passengers.
Michael O’Leary, CEO of Aer Lingus, appears to view the IAG offer favorably, not only because of the company’s independent release of its statement, but also because he recently said that he is open to a bid for Ryanair’s stake in his company.
Stay tuned.
