Spanish low-cost airline Vueling today rejected the offer made by IAG, parent company of British Airways, for the 54% of the company it still doesn’t own. The offer, of 7 euros a share, was made back in November but the board of Vueling have claimed that it doesn’t reflect the true value of the company.
With IAG’s existing Spanish carrier, Iberia, bleeding losses at an alarming rate, the far more efficient Vueling was seen by the IAG board as a way to re-model its business in a Spanish market which has been hit not just by continued economic decline but also fierce competition from other airlines (ie Easyjet and Ryanair) as well as high speed rail. Buying Vueling would not only give IAG a profitable partner in an important market, it would also act as an ‘incentive’ for Iberia unions to accept staff cuts and new conditions or risk losing routes and business to Vueling.
At the time IAG made their offer, it was at a significant premium to Vueling’s share prince; since then however Vueling’s share price has risen strongly and is now itself trading at a premium of around 10% above the offer price. Time will tell just how highly IAG value Vueling and whether an improved offer is in the pipeline.