Aer Lingus shares closed almost 9% higher yesterday evening as it emerged the airline had received a takeover approach from IAG - the owner of British Airways.
The offer, which was made on Sunday, was rejected by Aer Lingus' board which described it as fundamentally undervaluing the airline. The Financial Times reports this morning - citing an unnamed source which it says is familiar with the matter - that the offer valued Aer Lingus at €1.2 billion. At a closing price of €1.98 in Dublin yesterday, Aer Lingus is worth €970m. Any bid would, of course, need the support of the Government, which owns 25% of the airline, and Ryanair - which has a 29.9% stake - to succeed.
David Donnelly, analyst with Cantor Fitzgerald Ireland, says that IAG appears very serious about the bid for Aer Lingus. The Aer Lingus Heathrow slots would appear to the primary motivator for the approach, he adds. These slots carry a significant amount of value - British Airways has about 50% of the slots on a daily basis and Aer Lingus comes in at about third or fourth with about 3%. A degree of horsetrading goes with these slots during the winter and summer periods, but Mr Donnelly points out that Etihad last year paid out nearly €52m for three sets of slots at the busy UK airport.
The analyst says that given recent developments at Dublin Airport, which has seen it emerge as a very viable transatlantic hub, cuts the risks of the slots being used for busier routes by other airlines other than the Dublin-London route. He also says that the airline's biggest stakeholders - Ryanair and the Government - would not like to sell at the level offered by IAG yesterday. But if IAG were to come back with a higher offer, he says it would certainly be of interest to Ryanair as their near 30% stake has been substantially written down over the years to the tune of about €147m.
Mr Donnelly also points out that Aer Lingus management has come through a very challenging period and the pension issue at the airline looks like it could be finally resolved. He thinks the airline's management would be very keen to start growing and progressing the airline now that the more troubled waters are behind it. He also noted that trends at the airline have been very strong this year, particularly in its long haul division. The falling oil price will also boost the performance at its short haul division as the airline is only 50% hedged for fuel for next year.
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MORNING BRIEFS - France's competition regulator has fined a group of consumer goods companies including L'Óreal and Unilever €951m after finding them guilty of colluding to fix the price of toothpaste, shampoo and other products. The combined fines are the highest ever handed down by the French watchdog. It uncovered practices including illicit meetings between employees of competing companies in restaurants and each other's homes at which they would co-ordinate their prices before entering negotiations with distributors. The companies involved denied the claims or stated that the fines were unjustifiably high. L'Óreal said it refuted "accusations of anticompetitive activity with its competitors".
*** China has revised upwards its GDP figure for 2013 - the total value of annual economic output in the People's Republic was 3.4% higher than previously stated according to new figures compiled in an economic census. That 3.4% is $308 billion. To put it in context the dollar value of Ireland's entire economic output last year was $212m. China says the revision more accurately reflects the value of its services sector.
*** Oil prices remain volatile in end of year trading. After sharp falls yesterday in the price of the two key oil benchmarks, both rose in Asian trading early this morning. US West Texas Intermediate (WTI) for January delivery rose 73 cents to just under $55 a barrel, while the equivalent Brent crude contract - the more important in terms of European fuel prices - gained 32 cents to $59.59.
