Ryanair renews bid for Aer Lingus

02 December 2008

Budget airline Ryanair has renewed a hostile bid to acquire Ireland's Aer Lingus, proposing an all-cash yesterday, valuing the target at €748 million.

Ryanair,  Europe's largest low-cost carrier, has offered €1.40 per share of Aer Lingus, which is exactly half of its offer of October 2006, when it had valued its rival at €1.48 billion. Ryanair's offer represents a 25 per cent premium to Aer Lingus' last week's closing price of €1.12.

The previous offer for the Irish airline was opposed by the Irish government which has a 25 per cent stake in the airline. It was also opposed by the airline's workforce. Aer Lingus has an employee share ownership trust holding 14 per cent of the company. The 2006 bid was finally blocked by European competition authorities in June 2007, who said the merged airline would dominate Dublin airport, and the Irish market.

Ryanair has a 29.82 per cent stake in the target company, which it acquired at an average price of €2.50. The airline is awaiting a decision on its appeal against the European competition commission ruling. EU competition commissioner Neelie Kroes had said last year that the unified entity would have led to a near-monopoly in the Irish market, to the detriment of the interests of passengers.

According to Kroes, monopolies are not good for consumers, and the merged airline would have formed a near-monopoly. She said that monopolies, as a rule, reduce consumer choice, lowered quality, and gave rise to higher prices.

Ryanair CEO Michael O'Leary said yesterday that his group had decided in favour of launching a renewed bid given the belief that the competitive landscape had changed substantially, with consolidation starting to sweep the European airline industry.