The revised takeover bid from the British Airways owner was made at the end of December was for €2.40 (£1.88) per share against the €2.30 offered previously.
Activist Aer Lingus investor Crystal Amber, which holds a 2.8% stake, called on IAG to raise its bid to €3 a share, valuing the carrier at €1.6 billion.
“We think the board of Aer Lingus was absolutely right to reject an offer at €2.40,” Richard Bernstein, investment adviser at Crystal Amber, told the Sunday Telegraph.
He said that the Dublin-based airline was worth a “minimum” of €2.75 a share and that IAG could be forced as high as €3.
Bernstein expects IAG to return again with a sweetened third offer.
“When [IAG boss] Willie Walsh bid for Vueling he bid €7 initially which was rejected, and then he paid €9.25 in the agreed deal so there’s a bit of a precedent,” he was quoted as saying.
Bernstein previously urged IAG to offer €2.60 a share, but said that in the light of last Thursday’s strong fourth-quarter trading update from Aer Lingus, such a bid would be “insufficient”.
The airline said operating profit for 2014 would surpass the €61.1 million it reported a year earlier and that it had boosted fuel hedging to benefit from falling fuel prices.
Revealing that its latest offer had been rejected, IAG said on Friday: “There can be no certainty that any further proposal or offer will be forthcoming. A further statement will be made if and when appropriate.”
A successful bid for Aer Lingus would see IAG gain more precious take-off and landing slots at Heathrow. But any acquisition would require the backing of Ryanair which owns 29.9% of its Irish rival, and has itself tried and failed to take it over.
The Irish government owns 25% of Aer Lingus and would also have had to agree the deal.
Sourced from Travel Weekly