Key Elements of Offer Doc
Ryanair Holdings PLC
20 October 2006
Not for release, publication or distribution, in whole or in part, in or into or
from Australia, Canada, Japan, South Africa or the United States or any other
jurisdiction where it would be unlawful to do so
Ryanair announces that the Offer Document to Aer Lingus shareholders will be
posted on Monday, 23 October 2006.
A Ryanair statement outlining the key elements of the Offer Document is set out
below.
The Board of Ryanair Holdings plc announced today (Friday, 20 October 2006) that
the Offer Document will be published and posted to Aer Lingus shareholders on
Monday next, 23 October 2006. On 5 October 2006, Ryanair announced a Cash Offer
of €2.80 per Aer Lingus Share, which values Aer Lingus at approximately €1.48bn,
significantly higher than the €1.16bn IPO value of just 8 days previously.
Speaking today, Ryanair's Chief Executive, Michael O'Leary said:
'Ryanair believes that its Cash Offer represents excellent value for Aer Lingus
Shareholders and offers significant attractions to Aer Lingus' stakeholders.
This Offer represents a unique opportunity to form one strong Irish airline
group with over 50 million passengers per annum, capable of competing against
the three European mega carriers. Ryanair's strategy will be to expand, enhance
and upgrade Aer Lingus' operations. Without Ryanair, Aer Lingus will continue to
be a small regional European airline which, because of its size and regional
nature, is unlikely to be of interest or relevance to the three major European
airline groupings.
Excellent Value for Aer Lingus Shareholders
•27% Premium on IPO
On 27 September 2006, the Government of Ireland, Aer Lingus and their respective
advisers determined that €2.20 was an appropriate price at which to issue and
sell Aer Lingus Shares pursuant to the IPO. The ESOT also agreed to this price.
The Ryanair Offer of €2.80 is a generous premium of 27 per cent. in just 8 days.
•Ryanair stakebuilding has supported share price appreciation since IPO
The price appreciation of Aer Lingus Shares post the IPO but prior to Ryanair's
Cash Offer on 5 October 2006 occurred over the same short period during which
Ryanair was purchasing a 16 per cent. stake in Aer Lingus at an average price of
€2.42. On 2 October and 3 October, days during which Ryanair was not actively
purchasing Aer Lingus Shares, the average price per Aer Lingus Share fell back
from €2.48 to €2.41.
•Volatile earnings record of Aer Lingus
Aer Lingus is an airline with a volatile earnings record which came close to
bankruptcy four years ago, and whose cumulative losses (€616m) exceeded its
cumulative profits (€433m) over the past 14 years by over €180m. By contrast,
Ryanair has been profitable in every one of the past 14 years.
•Irish Government receives over €500 million and achieves its strategic
objectives
If it accepts the Cash Offer the Irish Government will realise over €500 million
from the sale of its Aer Lingus Shares whilst also achieving its stated
objectives of retaining the Heathrow slots and the Aer Lingus brand, and
securing the long term future of the airline.
•Aer Lingus employees realise an average of over €60,000 each - tax free
structure for ESOT Members
If they accept our Cash Offer, Aer Lingus employees will realise over €220m from
the sale of their Aer Lingus Shares. This represents an average of over €60,000
for each employee. There is also a means by which Aer Lingus employees and
former employees, who are ESOT Members, can realise the proceeds of the sale of
the shares held by the ESOT in a tax free manner (see the Appendix to this
announcement). Ryanair believes that the consequences of its bid failing will be
that Aer Lingus employees will hold a substantial minority shareholding, the
value of which will have fallen significantly, in an illiquid company, and
Ryanair would urge ESOT Members to bear this in mind in their consideration of
the Offer and their communications with the ESOT trustees.
Good for competition and good for consumers
Ryanair's Offer commits to maintaining Aer Lingus as a stand-alone separate
airline. Because the two airlines will compete vigorously, this will not lead to
a monopoly. In any event, the question of a monopoly does not arise as there are
50 other scheduled airlines competing with Ryanair and/or Aer Lingus at Dublin
Airport, some of which (Air France, Lufthansa and British Airways) are
significantly larger than Ryanair and Aer Lingus combined.
There is little crossover because Ryanair and Aer Lingus only compete on about
17 of more than 500 combined routes.
Whilst Ryanair and Aer Lingus have 61% of movements at Dublin Airport, this is
not dissimilar to other large airline groupings at other European airports
including SAS and its Lufthansa partners in Copenhagen (over 85% of seats),
Austrian and its Lufthansa partners in Vienna (over 70% of movements), Olympic
in Athens (over 73% of seats), TAP and its Star Alliance Partners in Lisbon (60%
of seats), Air France and its Sky Team Associates in Charles de Gaulle (62% of
movements), and Lufthansa and its Star Alliance Partners in Munich (67% of
movements).
During the 6 months to 30 June 2006, Aer Lingus' average short haul fare
increased by 2% to €86.49. This is in line with Aer Lingus' strategy to
''Maximise Passenger Revenues'' (Source: IPO Prospectus, p71). Similarly, Aer
Lingus has refused to reduce its fuel surcharge despite recent falls in oil
prices. Rising fares and high fuel surcharges are bad for competition and bad
for consumers.
By contrast, Ryanair's Offer guarantees to reduce Aer Lingus' short haul fares
by 21/2% per year for a minimum period of 4 years and to reduce Aer Lingus' fuel
surcharges as oil prices fall. Lower fares and lower surcharges will be good for
consumers. Ryanair's Offer will therefore increase competition and lower prices
which is good for consumers.
Good for the future of Aer Lingus
The board of Ryanair believes that this Offer represents a unique opportunity to
form one strong Irish airline group with over 50 million passengers per annum,
capable of competing against the three European mega-carriers (Air France,
British Airways and Lufthansa). Without Ryanair, Aer Lingus will continue to be
a small regional European airline which, because of its size and regional
nature, is unlikely to be of interest or relevance to the three major European
airline groupings.
Ryanair provides Aer Lingus with a strong airline partner of substantial
financial strength and access to low cost aircraft and financing. Ryanair's
strategy will be to expand, enhance and upgrade Aer Lingus' operations. Ryanair
intends to retain the Aer Lingus brand and operate the two airlines separately.
Both companies will continue to compete vigorously in the small number of routes
(about 17) where they currently compete, and will focus on reducing costs and
lowering air fares.
If successful, the Offer will replicate similar airline consolidations in other
European countries by the likes of British Airways (which acquired British
Caledonian, Danair, and Cityflyer and invested in Iberia); Air France (which
acquired KLM, Britair and Regional) and Lufthansa (which acquired Eurowings,
Swiss, and Lufthansa Cityline and invested in SAS and BMI). This pan-European
trend towards airline consolidation has seen the emergence of three ''mega
carriers'', Air France, British Airways and Lufthansa. A privatized Aer Lingus
(without a strategic partner) will be unable to compete with these mega carriers
because it has neither the scale nor the route network. Equally Aer Lingus will
be unable to compete with low cost carriers such as Ryanair because it has
neither the cost base nor the low fare structure.
Isolated as a small regional airline, Aer Lingus will continue to be at the
mercy of its controlling shareholders (the Irish Government and the workers/
trade unions) whose de facto control over the airline in recent years has seen
it:
•Lurch from crisis to crisis.
•Incur substantial cumulative losses.
•Suffer repeated strikes, work stoppages and industrial action.
•Discourage successful management.
•Preside over 3,000 job losses.
•Significantly reduce services on routes between Ireland and the UK.
Brighter future with Ryanair
Ryanair offers a better, viable, financially secure future for Aer Lingus
through its strategy which includes:
•Reducing Aer Lingus' average short haul fare (€87.55 in 2005) by 10% over
the next four years. These fare reductions will promote competition, will
benefit consumers and will reverse Aer Lingus' current strategy which is to
''maximise passenger revenues''. (Source: IPO Prospectus.)
•Reducing Aer Lingus' fuel surcharges as oil prices fall (something that
Aer Lingus recently refused to do).
•Retaining the Aer Lingus brand and continuing to operate the two airlines
separately.
•Retaining all profitable routes currently operated by Aer Lingus.
•Reducing Aer Lingus' costs through improved efficiencies, superior
purchasing power and lowering overheads.
•Assisting Aer Lingus with its fleet expansion either by providing it with
access to Ryanair's lower cost aircraft, or using Ryanair's purchasing power
to negotiate lower costs with aircraft manufacturers.
•Upgrading Aer Lingus' transatlantic fleet and updating its long haul
product.
•Improving Aer Lingus' inferior customer service by reducing delays,
cancellations and lost baggage.
Statements of Aer Lingus Board and the Minister for Transport
Aer Lingus board announcement 5th October 2006
In its announcement which appeared on the RNS on 5 October last, the Aer Lingus
board claimed:
''This approach is unsolicited, wholly opportunistic and significantly
undervalues the Group's businesses and attractive long term growth potential.''
It is extraordinary for the Aer Lingus board to claim that Ryanair's Offer
''significantly undervalues'' Aer Lingus when Ryanair's €2.80 offer per share
represents a 27% premium to the €2.20 per share valuation which the board of Aer
Lingus agreed just 8 days previously.
Minister Cullen's statement 6th October 2006
Taking just a few of the points made by Minister Cullen in his statement,
Ryanair responds as
follows:
(a) '...I do not consider that the Government's and Ireland's strategic
objectives would be well served by a takeover of Aer Lingus by
Ryanair.''
Ryanair believes that its proposal represents Aer Lingus' best
opportunity to remain an Irish headquartered, managed, controlled and
regulated airline, fully focused on Irish strategic objectives.
Ryanair's Offer clearly meets the Government's strategy by securing the
future of Aer Lingus, retaining the Heathrow slots and Aer Lingus'
branding. Ryanair's Offer - if accepted - will establish one strong
Irish airline group (as there is in the UK (BA), Germany (Lufthansa) and
France (Air France)) which clearly meets Ireland's strategic objectives.
(b) ''The IPO means that Aer Lingus is better positioned than ever in the
past, to grow and develop its business and to minimise the opportunities
for competitors.''
If Ryanair's Offer fails, Aer Lingus will continue to be under the de
facto control of the Government and unions. Given this Government's
track record on aviation and transport issues generally (ranging from
the state monopolies of Dublin Airport Authority, Dublin Bus, and CIE
and all points between) this will mean that the dead hand of
anti-competitive, monopolistic and anti-consumer policies continues to
drag down Aer Lingus. Ryanair finds it unusual that the Minister now
confirms that the rationale for the IPO of Aer Lingus was to ''minimise
the opportunities for competitors''.
(c) ''Delivering a single airline group as Ryanair suggests will not deliver
the benefits to the Irish consumer that Ryanair has suggested.''
This claim is without foundation given that Ryanair's Offer, if
successful, commits it to reducing Aer Lingus' fares by 21/2% per year
for a minimum period of 4 years and reducing the fuel surcharge, both of
which are clearly of benefit to, and have the support of, consumers.
(d) ''consumer interests are best served by having a variety of product
offerings that meet the requirements of different segments of the market
and our policy in respect of airlines and airports has been developed to
deliver this and to facilitate flexibility and choice for the consumer.''
Ryanair's Offer for Aer Lingus guarantees that Aer Lingus and Ryanair
will continue to be run and managed separately, serving different market
segments, with different product offerings. The combination of Ryanair
and Aer Lingus will still find it difficult to advance consumer
interests when dealing with uncompetitive monopolies, such as the DAA,
which are owned, protected and operated by the Minister for Transport.
The DAA currently proposes to increase passenger charges by 60% at
Dublin Airport.
e. ''The Ryanair low-cost model has transformed the aviation experience for
consumers and nowhere more than Ireland.''
For all of the reasons set out in this announcement and as our proven
track record clearly demonstrates, Ryanair believes that our generous
offer for Aer Lingus will ensure that Aer Lingus' customers will in
future enjoy and benefit from our plan to lower fares and improve
services in a stand alone, separately managed Aer Lingus.
Ryanair's Cash Offer delivers excellent value for Aer Lingus' Shareholders
whilst ensuring that the price on offer is one which will enable Ryanair to
continue to realise its objective of developing Aer Lingus, lowering fares and
advancing the best interests of Irish and European consumers.
Full details of the Cash Offer, including the terms and conditions under which
it is being made, will be posted to Aer Lingus shareholders on Monday next, 23rd
October 2006. The Cash Offer is conditional, amongst other things, upon
acceptances being received in respect of more than 50% of the Aer Lingus Shares
the subject of the Offer, including any Aer Lingus Shares beneficially owned or
controlled by Ryanair.
Full details for enquiries are printed at the end of this announcement:
THE RYANAIR CASH OFFER
Ryanair's generous cash offer
1. €2.80 is an excellent offer
Ryanair's Offer of €2.80 in cash per Aer Lingus Share values Aer Lingus
Group plc at approximately €1.481bn compared to its flotation value of
€1.163bn just 8 days prior to Ryanair's Offer.
2. 27% premium in just 1 week
The Offer represents a premium of approx 27% over the IPO price of Aer
Lingus (€2.20) which was agreed as an appropriate value by the Government of
Ireland, the Board of Aer Lingus, the ESOT and their respective advisers, on
27 September - just 8 days prior to Ryanair's Offer.
3. Ryanair's bid is supporting an inflated share price
If the Offer is not accepted, there is a likelihood that the share price of
Aer Lingus will fall significantly. During the two days (Mon 2nd and Tue 3rd
October) when Ryanair was not actively buying in the market, the Aer Lingus
share price fell from €2.48 to €2.44, and from €2.44 to €2.41.
4. Government to realise over €500m
If the Offer is accepted, the Irish Government will realise a total of over
€500m from the sale of its stake in Aer Lingus, an enormous return from an
airline which was, by its own admission, on the edge of bankruptcy just four
years ago.
5. Aer Lingus employees realise an average of over €60k each - tax free
structure for ESOT
If the Offer is accepted, Aer Lingus employees stand to realise over €220m,
which equates to an average of over €60,000 per employee, and there is a
mechanism which would allow ESOT Members to realise the proceeds of the
shares held by the ESOT on a tax free basis.
6. Volatile earnings record of Aer Lingus
Aer Lingus is an airline with a volatile earnings record which came close to
bankruptcy four years ago, and whose cumulative losses (€616m) exceeded its
cumulative profits (€433m) over the past 14 years by over €180m. Aer Lingus'
earnings prospects will be enhanced by acceptance of the Ryanair Offer.
7. Ryanair's Offer will not lead to a monopoly
Ryanair's Offer commits to maintaining Aer Lingus as a stand-alone separate
airline. The two airlines will compete vigorously, therefore this will not
lead to a monopoly. Aer Lingus' IPO document confirms that there is little
crossover because Ryanair and Aer Lingus only compete on about 17 of more
than 500 combined routes (Source: IPO Prospectus, p79).
Whilst Ryanair and Aer Lingus together account for 61% of aircraft movements
at Dublin Airport, this is not dissimilar to other large airline groupings
at other European airports. For instance, SAS and its Lufthansa partners
have over 85% of seats in Copenhagen, Austrian and its Lufthansa partners
have over 70% of movements in Vienna, Olympic has over 73% of seats in
Athens, TAP and its Star Alliance Partners have 60% of seats in Lisbon, Air
France and its Sky Team Associates have 62% of movements in Charles de
Gaulle, and Lufthansa and its Star Alliance Partners have 67% of movements
in Munich.
In addition, Dublin continues to be served by over 50 other scheduled
airlines currently serving 112 international destinations, each of which is
free to open new routes and increase services at Dublin should they so wish.
Some of these airlines are significantly larger than the Ryanair/Aer Lingus
combination would be (e.g. British Airways, Lufthansa and Air France/KLM).
Moreover, these airlines can be joined by other airlines who wish to enter
or grow the market as Ryanair continues to do.
8. Good for competition and good for consumers
During the 6 months to 30 June 2006, Aer Lingus' average short haul fare
increased by 2% to €86.49. This is in line with Aer Lingus' stated strategy to
''Maximise Passenger Revenues'' (Source: IPO Prospectus, p71). Similarly, Aer
Lingus has recently refused to reduce its fuel surcharge despite recent falls in
oil prices (Source: Irish Independent, 4 October 2006). Rising fares and high
fuel surcharges are bad for competition and bad for consumers.
By contrast, Ryanair's Offer guarantees to reduce Aer Lingus' short haul fares
by 2.5% per year for a minimum period of 4 years and to reduce Aer Lingus' fuel
surcharges as oil prices fall. Lower fares and lower surcharges will be good for
consumers. Ryanair's Offer will therefore increase competition and lower prices
which is good for consumers and should stimulate growth.
YOUR ALTERNATIVE (IF YOU DO NOT ACCEPT THE CASH OFFER)
AER LINGUS FACES AN UNCERTAIN FUTURE AS A SMALL REGIONAL AIRLINE
IN A COMPETITIVE MARKET WITH A HIGH FARE STRUCTURE
AND AN UNCOMPETITIVE COST BASE.
SUSTAINABILITY OF AER LINGUS PROFITABILITY IS UNCERTAIN
1. Aer Lingus' short haul fares are uncompetitive
Aer Lingus' average short haul fare of €87.55 is hopelessly uncompetitive in
the face of Ryanair's average equivalent of €41.23. As a result, Aer Lingus
has seen its share of traffic between Ireland and the UK collapse in recent
years as highlighted in the table below.
Aer Lingus' Share of Traffic Collapses
Jan 2000 Aug 2006 Decline
Traffic Traffic
Share Share
Dublin to London 42% 31% -26%
Cork to London 54% 40% -26%
Shannon to London 60% 37% -38%
Aer Lingus' high fares render it unable to compete with Ryanair and other
airlines including Easyjet, and this casts considerable doubt on its
profitability and revenue maximisation strategy. Over recent years Aer
Lingus has been forced either to withdraw or reduce services across most of
the key Ireland to UK routes including Gatwick, London City, Stansted,
Liverpool, Bristol, Glasgow and Edinburgh.
2. Aer Lingus' cost per passenger is too high
Aer Lingus' estimated average cost per short-haul passenger at €80, is
double that of Ryanair. Given Aer Lingus' dependence on the Irish market,
its rising cost base, and its inability to compete with Ryanair and other
carriers, it is inevitable that Aer Lingus will struggle to compete with
Ryanair's lower fares on both its UK and European routes.
3. Customer service delivery requires improvement
Aer Lingus' customer service delivery continues to underperform compared to
Ryanair. We believe that Aer Lingus' ''on time'' performance, rate of flight
cancellations and lost baggage record have historically lagged behind those
of Ryanair. The CAA's punctuality statistics for 2005 show that just 72% of
Aer Lingus' UK flights operated on time, way behind Ryanair's 81% record.
Because of Ryanair's superior customer service delivery and lower prices,
Ryanair believes that on most routes where passengers have a choice, many
more of them prefer to fly with Ryanair.
4. Aer Lingus revenue maximisation strategy is unlikely to be achieved
Ryanair has recently announced further new route expansion from Dublin to
Continental Europe. In Summer 2007, Ryanair will offer 53 European routes
from Dublin compared to just 33 in Summer 2006. Whether this Offer succeeds
or otherwise, the amount and extent of competition between Ryanair and Aer
Lingus will intensify further next year. Ryanair's lower fares, younger
fleet, lower cost base and better frequencies will put downward pressure on
Aer Lingus' short haul fares and its profitability at a time when its stated
strategy is ''Maximising Passenger Revenues'' (i.e. not passing on savings
to passengers but charging them as much as Aer Lingus will get away with).
5. Aer Lingus' high fuel surcharges inhibit long haul growth
Aer Lingus' refusal to reduce its fuel surcharges as oil prices fall will
inhibit the growth of its long haul business. Aer Lingus confirmed in the
Irish media on 4 October that it ''had no plans to abolish or reduce their
fuel surcharges despite falling oil prices'' (Source: Irish Independent).
The Consumer Association of Ireland called on Aer Lingus to abolish or
reduce its fuel surcharges given that oil prices had fallen by up to 25% in
recent weeks. The continuation of these high surcharges at a time when oil
prices have fallen is bad for consumers and competition.
6. Aer Lingus is exposed to high and rising costs at Dublin Airport
As the IPO Prospectus confirms, Aer Lingus - unlike Ryanair - is heavily
dependent on Dublin Airport (i.e. the DAA). This exposes Aer Lingus to high
and rising costs at Dublin due to Aer Lingus' lack of purchasing power. The
DAA monopoly recently proposed a second terminal at a cost of over €750m -
41/2 times more than the original €170m cost announced in August 2005. This
fourfold increase in the cost of this facility (which is designed primarily
for Aer Lingus) has led the Chairman of the DAA to announce recently that it
would be seeking a 60% increase in charges at Dublin Airport. Any such cost
increase will have a detrimental impact on Aer Lingus' costs (and hence
passenger fares) because of its over-reliance on Dublin. Furthermore, as a
small regional airline, Aer Lingus has little purchasing power and will
continue to be at the mercy of substantial cost increases at many airports
and other providers of services and products.
7. Aer Lingus is a small, regional, peripheral European carrier
With 8 million passengers annually compared to Ryanair's estimated 42.5
million this year, Aer Lingus is smaller than many other similar European
mid-size carriers who have in recent years either been taken over or have
sold significant minority stakes to one of the European mega carriers. Aer
Lingus is smaller in traffic terms than other such European regional
airlines including Swiss, BMI, SAS (all Lufthansa subsidiaries/associates),
KLM (Air France), Iberia (BA), Alitalia and Air Berlin. Because of its
peripheral location and modest size, Aer Lingus is unlikely to be an
attractive partner to any of the European mega carriers (Air France, BA,
Lufthansa) as is evidenced by Aer Lingus' recent decision to terminate its
membership of BA's One World alliance.
Without a strong financial/airline partner, Aer Lingus will be exposed to
the volatility of the international markets and the cyclical nature of the
air travel industry. As an indication of how Ryanair could transform Aer
Lingus' purchasing power, Ryanair has in the last month purchased more new
short haul aircraft (32) than are in Aer Lingus' entire short haul fleet
(28).
8. Aer Lingus' isolation will limit growth
Without Ryanair's investment, Aer Lingus will be excluded from the EU-wide
trend towards airline consolidation. This consolidation will have damaging
consequences for Aer Lingus' existing business.
SUSTAINABILITY OF CURRENT SHARE PRICE IS UNCERTAIN WITHOUT RYANAIR
9. Share price inflated by Ryanair offer
Aer Lingus' post IPO share price increased largely on the back of Ryanair's
stake building. During the two days (Mon 2nd and Tues 3rd October) during
which Ryanair was not actively buying shares, the price of Aer Lingus shares
fell back from €2.48 to €2.44, and then from €2.44 to €2.41. Aer Lingus'
share price is likely to fall significantly if the Ryanair bid fails.
10. Free float will be limited
Ryanair is committed to maintaining a significant minority stake in Aer
Lingus. The Government has confirmed that it ''remains committed to
maintaining a share of least 25.1%'' (Source: Statement of Minister for
Transport, 6 October 2006). The ESOT and employees could hold up to a
further 15%. If the Ryanair bid fails, this shareholder profile will
significantly reduce Aer Lingus' free float, which will make for an illiquid
market in Aer Lingus' shares.
11. Adverse consequences for ESOT shareholding
Ryanair believes that the consequences of its bid failing will be that the
ESOT will hold a substantial minority shareholding, the value of which will
have fallen significantly, in an illiquid company, and Ryanair would urge
ESOT Members to bear this in mind in their consideration of the Offer and
their communications with the ESOT trustees. By contrast, if the ESOT
accepts this Offer, it will realise a substantial premium over the IPO
price, its members will be working for a much more secure Irish airline
group, it will own highly liquid shares in Ryanair with an option to dispose
of them over the coming years in a tax free structure (as set out in the
Appendix to this announcement), and Aer Lingus employees can realise an
average of over €60,000 tax free per person.
CONTINUATION OF GOVERNMENT / TRADE UNION CONTROL COULD IMPAIR SHAREHOLDERS'
INVESTMENT
12. Government and Trade Union domination will not be in all shareholders'
interest
If the bid fails, Ryanair will be a significant minority shareholder, without
board representation and with no influence over the day to day management and
operations of Aer Lingus. The airline will continue to be dominated by the Irish
Government and the ESOT/employees/trade unions who between them currently
control over 40% of the airline's shares and have appointed all of the current
board of directors. In these circumstances the dominant influence in Aer Lingus
will continue to be the interests of employees rather than the interests of all
shareholders.
The directors of Aer Lingus may find it very difficult to discharge their
fiduciary duty to act in the best interests of the company as a whole, and the
Aer Lingus board may well face the prospect of stalemate, ineffectiveness and
conflict.
''Employee interest'' domination has impaired the performance of Aer Lingus in
recent years. Examples include:
•A history of strikes, stoppages and inefficient work practices.
•An inconsistent and volatile earnings record. Aer Lingus' cumulative
losses (€616m) significantly exceeded its cumulative profits (€433m) over
the last 14 years. This has forced the airline into two substantial
re-organisations, yet despite this its costs per passenger are double that
of Ryanair.
•Aer Lingus courted bankruptcy on two occasions in recent years and only
survived following a massive injection of over €220m of State aid and two
radical restructuring plans.
•Effective management is discouraged. The previous management team (led by
Willie Walsh) departed in January 2005 having been roundly criticised and
undermined by both the trade unions and the Irish government. The Prime
Minister in the Irish Parliament attacked the management's then proposed MBO
as ''(a time) when management wanted to steal the assets for themselves
through a management buyout, shafting staff interests''. Investors will be
exposed to the continuing practice of the Irish government, trade unions and
employees to run Aer Lingus in the interests of staff rather than the
interests of all shareholders.
•The record of European airlines which continue to be dominated by
governments and trade unions is an abysmal one. It is characterised by
bankruptcy (in the case of Sabena and Swissair) or chronic and repeated
crises (in the case of Alitalia and Olympic Airways).
At a time when the overwhelming majority of major European airlines, including
British Airways, Lufthansa and Air France, have moved from government to private
ownership through stock market flotations, the future of Aer Lingus, and so your
investment, can only be damaged if the Irish government and employee interests
continue to maintain de facto control of Aer Lingus in the event of this bid not
succeeding.
APPENDIX
ADDITIONAL INFORMATION ON THE CASH OFFER REGARDING THE ESOT/APSS
If accepted, the Cash Offer would result in ESOT Members realising over €186
million for their Aer Lingus Shares, which equates to an estimated average of
€60,000 per ESOT Member.
These members can realise this money on a tax free basis, as explained below.
The Irish Revenue Commissioners will, on a concessional basis, normally permit
the reinvestment of all ESOT cash proceeds in Ryanair Shares without incurring a
liability to tax. This concession is subject to formal Revenue approval. The
availability of this tax free treatment in respect of shares held in the ESOT
will require majority approval of ESOT Members.
Assuming an entitlement of €60,000, if the ESOT reinvests in Ryanair Shares as
set out above, Ryanair Shares to the value of €25,400 can be released tax free
to ESOT Members by the end of August 2007 (if shares are allocated to the APSS
in 2006) or by January 2008 (if no shares are allocated to the APSS until 2007).
On release these members could immediately sell their shares in the market for
up to €25,400 tax free.
Further allocations up to €12,700 can be made for subsequent tax years until all
the shares have been appropriated - these shares can be released tax free to
ESOT Members, the precise timing of such allocations and releases will be
dependant on a number of factors, including satisfaction of the requisite 3 year
hold period.
This structure would enable ESOT Members to receive tax free proceeds, subject
to the then value of Ryanair Shares, of up to €25,400 by August 2007 or January
2008 and of €34,600 in subsequent tax years.
On release from trust, ESOT Members would be free to sell their Ryanair Shares
on the market to realise cash.
The calculations of ESOT entitlements in this announcement are based on the
ESOT's shareholding assuming exercise of the ESOT Option and assuming 3,200 ESOT
Members. References to amounts Aer Lingus employees' may realise assume
reinvestment of the cash proceeds acquired by the ESOT in Ryanair Shares as
outlined above and do not take into account any tax consequences which may apply
to any employees or former employees. It is also assumed that the Aer Lingus
Shares held by the APSS at Admission and Aer Lingus Shares acquired by employees
and former employees since that date have not been disposed of. The above is a
summary of the Irish tax considerations that may apply. The comments are
intended only as a general guide and do not constitute tax advice. You are
recommended to seek your own personal financial and taxation advice.
This announcement does not constitute an offer or an invitation to offer to
purchase or subscribe for any securities. Any response in relation to the Offer
should only be made on the basis of the information contained in the Offer
Document or any document by which the Offer is made.
The directors of Ryanair accept responsibility for the information contained in
this announcement, save that the only responsibility accepted by the directors
of Ryanair in respect of the information contained in this announcement relating
to Aer Lingus and the Aer Lingus Group, which has been compiled from published
sources, has been to ensure that such information has been correctly and fairly
reproduced or presented (and no steps have been taken by the directors of
Ryanair to verify this information). To the best of the knowledge and belief of
the directors of Ryanair (who have taken all reasonable care to ensure that such
is the case), the information contained in this announcement for which they
accept responsibility is in accordance with the facts and does not omit anything
likely to affect the import of such information.
Terms defined in the announcement issued by Ryanair on 5 October, 2006 have the
same meaning in this announcement unless otherwise stated.
This announcement, including information included or incorporated by reference
in this announcement, may contain 'forward-looking statements' concerning the
Cash Offer, Ryanair, and Aer Lingus. Generally, the words 'will', 'may',
'should', 'could', 'would', 'can', 'continue', 'opportunity', 'believes',
'expects', 'intends', 'anticipates', 'estimates' or similar expressions identify
forward-looking statements. The forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from those
expressed in the forward-looking statements. Many of these risks and
uncertainties relate to factors that are beyond the companies' abilities to
control or estimate precisely, such as future market conditions and the
behaviours of other market participants, and therefore undue reliance should not
be placed on such statements. Ryanair assumes no obligation in respect of, nor
intends to update these forward-looking statements, except as required pursuant
to applicable law.
Any person who is the holder of 1 per cent. or more of any class of shares in
Aer Lingus or Ryanair may be required to make disclosures pursuant to Rule 8.3
of the Irish Takeover Panel Act, 1997, Takeover Rules 2001 to 2005, as applied,
with amendments by the European Communities (Takeover Bids (Directive 2004/25/
EC)) Regulations 2006.
Davy Corporate Finance, which is regulated in Ireland by the Financial
Regulator, is acting for Ryanair and no one else in connection with the Offer,
and will not be responsible to anyone other than Ryanair for providing the
protections afforded to clients of Davy Corporate Finance nor for providing
advice in relation to the Offer, the contents of this announcement or any
transaction or arrangement referred to in this announcement.
Morgan Stanley & Co. Limited is acting exclusively for Ryanair and no one else
in connection with the Offer and will not be responsible to anyone other than
Ryanair for providing the protections afforded to clients of Morgan Stanley &
Co. Limited nor for providing advice in relation to the Offer, the contents of
this announcement or any transaction or arrangement referred to in this
announcement.
The availability of the Offer to persons outside Ireland may be affected by the
laws of the relevant jurisdiction. Such persons should inform themselves about
and observe any applicable requirements. The Offer will not be made, directly or
indirectly, in or into Australia, Canada, Japan, South Africa, the United States
or any other jurisdiction where it would be unlawful to do so, or by use of the
mails, or by any means or instrumentality (including, without limitation,
telephonically or electronically) of interstate or foreign commerce, or by any
facility of a national securities exchange of any jurisdiction where it would be
unlawful to do so, and the Offer will not be capable of acceptance by any such
means, instrumentality or facility from or within Australia, Canada, Japan,
South Africa, the United States or any other jurisdiction where it would be
unlawful to do so. Accordingly, copies of this announcement and all other
documents relating to the Offer are not being, and must not be, mailed or
otherwise forwarded, distributed or sent in, into or from Australia, Canada,
Japan, South Africa, the United States or any other jurisdiction where it would
be unlawful to do so. Persons receiving such documents (including, without
limitation, nominees, trustees and custodians) should observe these
restrictions. Failure to do so may invalidate any related purported acceptance
of the Offer. Notwithstanding the foregoing restrictions, Ryanair reserves the
right to permit the Offer to be accepted if, in its sole discretion, it is
satisfied that the transaction in question is exempt from or not subject to the
legislation or regulation giving rise to the restrictions in question.
Ends. Friday, 20th October 2006
Enquiries:
Ryanair Tel: +353 1 812 1212
Howard Millar
Michael Cawley
Davy Corporate Finance Tel: +353 1 679 6363
(Financial Adviser to Ryanair)
Hugh McCutcheon
Eugenee Mulhern
Morgan Stanley & Co. Limited Tel: +44 20 74255000
(Financial Adviser to Ryanair)
Gavin MacDonald
Colm Donlon
Adrian Doyle
Murray Consultants Tel: +353 1 498 0300
(Public Relations Advisors to Ryanair)
Jim Milton Tel: + 353 86 255 8400
Pauline McAlester Tel: + 353 87 255 8300
Mark Brennock Tel: + 353 87 233 5923
This information is provided by RNS
The company news service from the London Stock Exchange
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