NEW YORK ( The Deal) -- The Irish government has thrown its support behind International Airlines Group's €1.4 billion ($1.5 billion) bid for Aer Lingus Holdings, removing a major obstacle to a takeover, which would give the British Airways and Iberia parent vital new transatlantic capacity at Dublin Airport.
After four months of intense discussions with the bidder, Transport Minister Paschal Donohoe said late Tuesday that the government "considers that a sale of the state's minority shareholding to IAG, on the basis of the terms offered, would be the best means of securing and enhancing Ireland's connectivity with the rest of the world and maintaining a vibrant and competitive air transport industry in Ireland."
"It would also best serve the interests of the traveling public, Aer Lingus and its employees, the Irish tourism industry and the Irish economy as a whole," he added in a statement released after a cabinet meeting.
Aer Lingus shares extended gains made Tuesday on anticipation of government clearance and were up 1.9% at €2.44 in Dublin by Wednesday afternoon.
In London, International Airlines Group, or IAG, also edged higher. The U.K. company has a market value of about £11.2 billion ($17.2 billion).
The government said that it would tender its 25.1% stake, subject to approval by the Irish parliament, after IAG agreed to make legally binding commitments to retain Aer Lingus flights between three Irish airports and London's Heathrow for at least seven years, up from five years originally.
IAG also gave jobs and employment rights guarantees and signed up to binding pledges to keep the Aer Lingus brand and its Irish head office. IAG is led by Willie Walsh, a former Aer Lingus chief executive.
Attention will now turn to leading Aer Lingus shareholder, Ryanair Holdings (RYAAY), whose 29.8% holding is a legacy of previous unsuccessful bids.
Ryanair has consistently refused to deliver its verdict on the IAG offer until it has the bid documentation in its hands. However, it has been fighting a lengthy court battle in the United Kingdom to challenge the domestic competition regulator's decision that it must reduce that stake.
IAG's offer is conditional on Ryanair's approval and on it securing a 90% Aer Lingus stake.