Forex Marketz Daily Forex News – Fully Markets Update
International Consolidated Airlines Group, or IAG, (IAG-GB) has finally, after months of trying, bought Irelands Aer Lingus (EIL1-IE Irish Stock Exchange) for £1 Billion or nearly $1.5 billion in cash.
Investors are now going to decide if €2.50 per share along with a €0.05 cash dividend per share is a good deal. These investors include the Irish government and the airline Ryanair (RY4B: IE Irish Stock Exchange). The board at Ryanair is considering the offer.
The government of Ireland is likely to see some pressure concerning this offer as the air traffic received from Aer Lingus is a key component and supporter of the national economy. We are already seeing opposition from the Fianna Fail and Labor Party, two junior coalition members voicing concerns over the deal.
Since hitting a high of around €2.20 in 2006, the Aer Lingus stock price has fallen below its initial IPO price since 2008. The company’s margins are lower than IAG and it has also taken a hit from Ryanair over short haul, domestic, flights. The company has also faced scandal concerning its pension scheme over the last several years. This comes after a deal between Aer Lingus and the trade unions was agreed upon to cut its running deficit.
European Union has had Problems with this Deal
Anti-competition authorities within the European Union (EU) have also foiled previous bids by Ryanair to purchase Aer Lingus. They will be studying this current offer very closely. The EU will focus on Heathrow Airport, where IAG, operating through British Airways controls over fifty percent of the slots. This level could rise closer to 55 percent which endangers free market competition.
The deal is not set in stone. There are potential headwinds, both political and financial. We could also see antitrust issues pop up. Especially with the Dublin to Heathrow fight route.
