NEWTOWN, Conn. - The government of Ireland has agreed to sell its 25.1 percent stake in Aer Lingus to International Airlines Group (IAG) for nearly EUR1.4 billion ($1.5 billion). The deal is now subject to approval by Aer Lingus shareholders and by the Irish parliament.

IAG has offered to pay EUR2.50 for each share. Under the deal, Aer Lingus is to retain its existing slots at London Heathrow airport, and maintain a separate identity within IAG as an Irish airline. In addition, the carrier is to continue to operate its daily scheduled operations between Heathrow and Ireland for a period of at least five to seven years. The Irish government is to retain one share in the airline, thus affording it certain post-transaction rights.

The Irish government's acceptance of the IAG offer is only one step in IAG's bid to take over Aer Lingus. The largest shareholder in Aer Lingus is Irish carrier Ryanair, which owns a 29.8 percent stake in the airline. In recent years, Ryanair has been unsuccessful in three different attempts to acquire control of Aer Lingus, and the carrier is now widely thought to be amenable to selling its Aer Lingus stake to IAG.

IAG itself has had two previous failed takeover bids for Aer Lingus. The group is the parent company of British Airways, Iberia, and Vueling. Acquisition of Aer Lingus would enable IAG to develop its route network using Dublin as a hub between the U.K., continental Europe, and North America.

IAG's bid to acquire Aer Lingus will also eventually be reviewed by the competition authorities of the European Commission (EC).

Source: Forecast International Aerospace Group