Ryanair To Accept Bid For Aer Lingus Stake

The board of Ryanair has voted unanimously to accept an offer from IAG for their 29.8% stake in Aer Lingus (Other OTC: AELGF - news) .

The decision clears the way for the airline group, which also owns British Airways, to take over Aer Lingus as Ryanair will vote in support of the sale at an Extraordinary General Meeting (AGM) on 16 July.

IAG has confirmed it wants Aer Lingus to join the Oneworld airline alliance, of which its brands BA and Iberia are members, and become part of a joint business that IAG operates over the North Atlantic alongside American Airlines (Xetra: A1G.DE - news) .

It has agreed to build a new transatlantic hub at Dublin Airport as part of the €1.3bn (£940m) takeover deal.

The Irish government, which had controlled 25% of the company, accepted IAG's €1.36bn (£961m) bid for their share in May of this year.

The only hurdle now remaining is the European Union's competition authorities, who are required to agree to the takeover.

IAG may have to agree to concessions such as surrendering slots at Heathrow in order to alleviate any competition concerns.

Ryanair has itself tried to buy Aer Lingus on three occasions but has been knocked back by competition officials.

The decision to sell formally ends CEO Michael O'Leary's nine-year effort to seize his Dublin-based competitor.

The budget airline had also been ordered by the UK Competition Commission to reduce its stake in Aer Lingus by almost 25% in order to break its hold on routes between Britain and Ireland (Other OTC: IRLD - news) .

Ryanair's Michael O'Leary said: "We believe the IAG offer for Aer Lingus is a reasonable one in the current market and we plan to accept it, in the best interests of Ryanair shareholders.

"The price means that Ryanair will make a small profit on its investment in Aer Lingus over the past nine years.

"This sale of our stake is timely given that our original strategy for Aer Lingus (to use it as a mid-priced brand to offer competition to flag carriers at primary airports) has been overtaken by the successful rollout - since Sept 2013 - of Ryanair's "Always Getting Better" strategy, which has seen the Ryanair brand successfully enter many of Europe's primary airports, being rewarded with strong growth in our network, traffic, load factor and profitability, while keeping our fares low and our punctuality high.

"We wish IAG well with their takeover of Aer Lingus."

International Consolidated Airlines Group (IAG) offered Ryanair a cash payment of €2.50 per Aer Lingus share, plus a cash dividend of €0.05 per share.

But any profit made by Ryanair from the deal is unlikely to be very much above the price paid when they first acquired shares in 2006, as the Aer Lingus share price has risen only 1.3% since it first floated in September 2006.

Ryanair’s share price over the same period has risen 185.8%.

Aer Lingus has previously rejected two takeover bids by IAG claiming they undervalued the business.