Ryanair renews interest in Aer Lingus

Text: “Ryanair renews interest in Aer Lingus”

On the one hand, Ryanair has offered €748 million, i.e. €1.40 a share, in order to take over its rival. Considering the present situation in the European market, Ryanair might be confident that Aer Lingus and its shareholders seek consolidation. Besides, since €748 million is only the initial bid, Ryanair might have kept it low in order to be able to sweeten it in a second step.

On the other hand, Aer Lingus states its actual value as €2 billion, mainly by publishing radically changed financial forecasts in a so-called pro forma statement. It is pretty clear that this happens in the attempt to fend off Ryanair’s takeover bid. Therefore, it is questionable, how reliable such information is.

In my opinion, the actual value of Aer Lingus lies somewhat in between the two numbers, but significantly closer to Ryanair’s offer, which already represents a premium of 28% to the current share price.

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Why would it be difficult to run the German car manufacturer BMW as a ltd?

BMW, the car manufacturer from Munich is run as a public limited company (plc), which means that its equity capital is divided into shares that may be freely traded on a stock exchange. If it were run as a private limited company (ltd), this would cause several difficulties.

Firstly, the BMW shares could no longer be issued to the general public which makes it difficult to transfer their ownership and – in addition – makes them unattractive for investors. But BMW heavily relies on foreign investment, e.g. to bridge their long cash-to-cash cycle.

Secondly, the lack of capital sets a limit to expansion, which would be unfavorable in an industrial sector where the company has to adapt to the short term development. Moreover, BMW could no longer benefit from its economies of scale as strongly as it does at the moment.

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