Vueling Airlines SA’s board said investors should reject a 113 million-euro ($148 million) bid from IAG SA for shares the British Airways parent doesn’t yet own, spurring the stock to its biggest gain since the offer.
The 7 euros-a-share proposal from IAG, as International Consolidated Airlines Group SA is known, undervalues Vueling’s business, the Barcelona-based discount carrier said yesterday after European markets had closed.
Vueling stock rose as much as 6.6 percent to 8.37 euros and was trading 4 percent higher at 8.17 euros, 17 percent above the bid price, as of 9:36 a.m. in Madrid, valuing the whole company at almost 245 million euros. The IAG proposal fails to offer a sufficient premium, the board said in a statement.
“The inherent value for IAG in having full ownership of Vueling is possibly far greater than 7 euros per share over the longer term,” Donal O’Neill, an analyst at Goodbody Stockbrokers in Dublin, who rates the stock “buy,” said in an investor note.
IAG Chief Executive Officer Willie Walsh has made the takeover of Vueling central to his plan to overhaul the London-based company’s Spanish Iberia arm after the unit pushed the group to a 23 million-euro operating loss last year.
Walsh is seeking to acquire the 16.2 million shares of Vueling -- equivalent to 54.14 percent of the total -- that IAG doesn’t already control and has said the business would become an independently-run entity within IAG.
While buying the low-cost airline would improve IAG’s “financial stability,” according to the CEO, analysts have said the operation could be used as a vehicle to lower costs across Iberia, where workers are striking over 3,807 job cuts.
“We will reflect on Vueling’s announcement and provide an update in due course,” IAG spokeswoman Laura Goodes said.
Shares of IAG traded 0.5 percent higher at 242.80 pence, taking gains this year to 31 percent and valuing the company at 4.5 billion pounds ($6.8 million).