As expected, the Board of Aer Lingus has rejected Ryanair’s Offer to acquire control of Aer Lingus for €1.30 per share, saying that it “fundamentally undervalues Aer Lingus and represents a significant discount to the intrinsic value of the business”. The Board “unanimously recommends shareholders should take no action in relation to the Offer and should not sign any document sent by Ryanair or its advisers”.
A statement issued today said: “The Board of Aer Lingus Group plc (‘Aer Lingus’) notes the announcement made yesterday by Ryanair Holdings plc (‘Ryanair’) that it has posted its offer document containing the full terms and conditions of its offer to purchase the whole of the issued, and to be issued, ordinary share capital of Aer Lingus not already owned by Ryanair (the ‘Offer’).
“Ryanair’s 2006 offer was prohibited by the European Commission on competition grounds, and your Board believes that the reasons for prohibition are now even stronger than before: the number of routes that Ryanair would monopolise has sharply increased. Your Board has received legal advice that the European Commission is likely once more to prohibit the Ryanair Offer, and that this is not therefore a credible Offer which is capable of completion.
“In addition, the UK Competition Commission is continuing to investigate the anti-competitive effects of Ryanair’s 29.82% stake in Aer Lingus, despite Ryanair’s repeated and ongoing attempts to stop both this investigation and the previous Office of Fair Trading investigation. Your Board has received legal advice that the UK Competition Commission is likely to require Ryanair to sell down its current stake.
“Aer Lingus is a robust and profitable airline with a proven business model, a strong balance sheet and an internationally recognised brand. Your Board’s unanimous view is that Ryanair’s Offer to acquire control of Aer Lingus for €1.30 per share fundamentally undervalues Aer Lingus and represents a significant discount to the intrinsic value of the business:
- A discount of 31% to Aer Lingus’ gross cash per share of €1.87 (total €1,002 million)
– the gross cash on Aer Lingus’ balance sheet more than pays for Ryanair’s offer
- A discount of 17% to Aer Lingus’ Net Asset Value per share of €1.56 based on the NAV shown in the 31 December 2011 balance sheet
– this NAV does not attribute any value to either our attractive slot portfolio or brand
- An adjusted EV / EBITDAR multiple of 4.2x, a 30% discount to the average trading multiple of Aer Lingus’ traded peers of 6.1x
“Aer Lingus’ strategy of building a leaner and more efficient business is working. Operational and financial performance has improved greatly since 2009, resulting in a turnaround in operating result since that time of approximately €130 million. We have transformed a loss making Aer Lingus into a profitable airline with one of the strongest balance sheets in the European sector.
“For the reasons outlined above, your Board believes that Ryanair’s Offer is not in the interests of shareholders or Aer Lingus and is incapable of completion. Accordingly, the Board of Aer Lingus unanimously recommends shareholders should take no action in relation to the Offer and should not sign any document sent by Ryanair or its advisers.
“The Board of Aer Lingus will be writing to shareholders to set out in detail its reasons for rejecting the Offer within the next fourteen days in accordance with Rule 30.3(a) of the Irish Takeover Panel Act 1997.”