RYANAIR, the independent airline, is to float its shares on stock markets in Dublin and New York in a move which will value the company at up to £300 million.
The flotation of the airline, which has built its success on offering a low-fare service to the UK, is due at the end of the month It will raise between £34 million and £41 million in cash for the airline's founder, Dr Tony Ryan, and his family.
The share sale will reduce the Ryan family stake in the company from 62 per cent to 35.5 per cent. The remaining shares, held by the Ryan family trust, will be worth between £93 million and £110 million. Investors will be invited to buy 54.2 million shares in the airline at an offer price of between 165p to 195p per share, valuing the airline at between £261 million and £309 million.
The company's 700 employees will share a bonus payment of £1.9 million under the flotation plan. They will also get a priority allocation to subscribe for shares to a value of £4 million at the issue price.
The flotation on the Dublin exchange and the NASDAQ over-the-counter market in New York is aimed at raising between £89.4 million and £105.6 million for the company and the Ryan family.
Ryanair will use its share of the proceeds, expected to be between £55 million and £65 million, to pay off debts, fund future expansion and purchase new aircraft.
Reporting a 24 per cent rise in pre-tax profits to £26 million for the year ending in March 1997, Ryanair yesterday said it will introduce new services between London and Stockholm and London and Kerry next month. The company is adding eight aircraft to its existing fleet of 13 and is in negotiations with 14 airports in Europe to increase its range of destinations. Agreements have just been reached with four new airports, according to the chief executive,
Mr Michael O'Leary.
The flotation comes after more than five years of profitable trading for the company, which racked up losses of £20 million in its first five since it was founded in 1985. The owners, the Ryan family (62 per cent); a US airlines investor, Mr David Bonderman (20 per cent); and Mr O'Leary (18 per cent) are to sell just over one-third of the company to new investors.
The issuing of new shares will dilute the stakes of the existing shareholders. The prospectus also reveals that Mr O'Leary received £16.75 million in profit-related bonuses over the past three years.
Profit growth at Ryanair has been based on increasing passenger numbers by driving down airfares and maintaining low costs.
Passenger numbers have increased by an annual 36 per cent in recent years while revenue has increased by about 26 per cent a year and profit growth has been unbroken since 1991. Ryanair carried three million passengers in the year ending in March.
Low fares cause massive traffic stimulation, Mr O'Leary said. "Our secret is low fares, low fares and even more low fares. That is why you will see no meals, no newspapers, no frills, no nuts . . . except for the people running the place!"
Ryanair expects to continue to grow by about 20 per cent to 30 per cent a year. It will continue to negotiate long-term, low-cost contracts with airports and other service providers, wage increases will be tied to productivity, and routes will be expanded. About half of growth this year will come from existing services with the balance expected to come from new routes.
Company directors will now begin road shows in Ireland, the US, UK and Europe to assess investor demand for Ryanair shares. At the end of this period a price will be set and the shares will be allocated to investors.