British Airways owner International Consolidated Airlines (IAG) has got its wish. The Irish government has given the legacy carrier's bid for Aer Lingus (AER) its blessing, in turn relinquishing its 25 per cent stake in the Irish budget airline.
The cabinet's decision comes after nearly six months of negotiations aimed at soothing concerns over the bid's knock-on effect on jobs and flights to and from Ireland. But to finally persuade ministers into backing the deal, IAG has given a seven-year guarantee on routes into London's Heathrow from Dublin, Cork and Shannon, but this promise is conditional on airport charges staying flat. Clearly, bosses at IAG had to meet the government half-way; IAG chief Willie Walsh previously said a five-year guarantee was all he could offer. On that note, Aer Lingus' Belfast routes are still only guaranteed for five years.
Aside from the government and Aer Lingus employees, the agreed deal is also good news for the Irish carrier's shareholders. IAG first approached Aer Lingus with a takeover offer at the end of last year, and followed up with an indicative offer in January that valued the airline at €1.36bn (£1bn). The financial terms accepted by the Irish government are as previously indicated: €2.50 per Aer Lingus share, plus the €0.05 per share dividend already declared but yet to be paid. The total consideration is still €1.4bn, to be funded by debt. That represents a premium of approximately 40 per cent to the closing price of €1.82 per Aer Lingus share on 17 December 2014 - the last day of trading before the initial approach.
IAG has said the soon-to-be combined group could deliver up to 2.4 million more passengers by 2020, as well as adding four new destinations in North America and eight new aircraft to its fleet. The bid remains conditional on acceptance by fellow short-haul carrier Ryanair (RYA), which owns a 29 per cent stake in Aer Lingus, and on EU approval.
