Aer Lingus’ biggest City shareholder calls for higher offer

Crystal Amber, the Irish carrier’s fourth biggest investor, supports bid rejection but says it would welcome a higher offer from British Airways’ owner IAG

Aer Lingus’ biggest institutional shareholder has backed the Irish carrier’s rejection of IAG’s takeover approach but said it would welcome a higher second offer.

Crystal Amber, which owns a 2.8pc stake in Aer Lingus making it the fourth biggest after Ryanair, the Irish Government and Etihad, responded a day after shares in the Irish carrier soared on news of the approach.

“We’re fully supportive of management’s decision to reject this opportunistic offer”, Richard Bernstein, investment adviser at Crystal Amber, told The Telegraph. “This is a world class airline with great assets and strong growth prospects”.

However, the activist investment fund fuelled speculation that Willie Walsh, IAG’s chief executive, will have a second attempt at bulking up the airline group by adding: “If IAG would like to return with an offer which reflects this…we’d be happy to consider it”. Mr Bernstein added that a takeover would boost Dublin as a transport hub.

Crystal Amber built up its stake in the airline over the summer to urge the airline to not pay any more into its pension scheme. The activist investor, which also owns stakes in Thorntons, Pinewood Shepperton and J Sainsbury, recently announced plans to raise fresh firepower.

The City is heavily anticipating Mr Walsh to come back with a sweetened offer which will see him returning to the airline he joined to train as a pilot at the age of 17 before rising through the ranks to run the company.

Analysts at Davy said that they see “strategic merit in an offer of €2.50 a share.”

Being a takeover target is familiar ground for Aer Lingus as it has so far batted away three bids by Ryanair. As a result, IAG’s attempt to seize control hangs on the outcome of a protracted courtroom battle with Ryanair, which own a 29pc stake in Aer Lingus.
Ryanair has been ordered by UK competition authorities to sell down its stake in Aer Lingus to 5pc but Michael O’Leary, Ryanair’s chief executive, has challenged the ruling several times.A decision by the Court of Appeal has been postponed this morning until January, according to legal sources.

As a result Mr O’Leary, who built up Ryanair’s stake by spending an average of €2.40 a share, remains kingmaker in the takeover tussle. Analysts stress that it is unlikely the outspoken chief executive will swallow a lesser price than he paid for the stock.
Mr O’Leary and Mr Walsh are both friends and rivals and it was previously agreed that British Airways would pick up Aer Lingus’ highly prized landing slots if Ryanair succeeded in taking over its smaller rival.

Aer Lingus’ ownership structure is further complicated by the Irish government owning a 25pc stake as a hangover from when the Irish carrier was entirely state-owned. Stephen Furlong, analyst at Davy, said it would be „politically more palatable“ if a bid was done at a price higher than the €2.20 a share listing price in 2006.

The Irish government has said that it remains “open to the sale” of its stake “but only when market conditions are favourable and on terms at a price that are acceptable to the Government”.

Other notable shareholders of the business include Abu Dhabi’s Etihad, with 4pc, and Irish media tycoon Denis O’Brien continues to own a small position, although it is understood he sold most of his shares to Crystal Amber.

Mr O’Brien has argued in the past that he didn’t want Ryanair to buy Aer Lingus as he would hate for foreign visitors to experience O’Leary’s planes as their first taste of Ireland.

With The Telegraph