Considering the other mergers that have been allowed, it's difficult to see a reason why Ryanair's bid would be rejected other than a simple disdain for O'Leary's budget line.
By Chris Jasper
Ryanair Holdings Plc, Europe’s biggest discount airline, said it will make another attempt to purchase Aer Lingus Plc, with a bid valuing its Irish rival at 694 million euros ($883 million).
Ryanair intends to make an all-cash offer of 1.30 euros per share via a wholly-owned subsidiary, Coinside Ltd., the Dublin- based company said in a statement yesterday. The discount carrier already holds a 29.8 percent stake acquired in 2006 and 2007.
Having been blocked from taking control of Aer Lingus in the past by antitrust rulings, Ryanair said it’s renewing its approach amid changed circumstances following the consolidation of Europe’s network carriers, a decline in traffic in Dublin that leaves space for new entrants, and Irish government plans to sell a 25 percent Aer Lingus stake in a state-asset auction.
“This offer represents a significant opportunity to combine Aer Lingus with Ryanair to form one strong Irish airline group,” Chief Executive Officer Michael O’Leary said in the statement. He pledged to help lift Aer Lingus’s annual passenger total to 14 million over five years from 9.5 million today and said Ryanair would also invest in expanding trans-Atlantic flights.
Aer Lingus spokesman Declan Kearney said by phone that he couldn’t comment on Ryanair’s proposals. Irish Transport Minister Leo Varadkar will study the bid and discuss it with colleagues, he said in a statement received by text message.
The offer represents a premium of 38 percent over the closing price June 18, Ryanair said. Investors would also get a dividend of 3 cents a share announced by Aer Lingus on May 4 that they’re due to receive on July 31, it said.
European Union regulators blocked Ryanair’s bid for Aer Lingus in 2007, saying a takeover would allow the discount airline to dominate 35 routes and control 80 percent of the market in Dublin. Ryanair lost a 2010 appeal of the merger ban.
Antoine Colombani, a spokesman for the European Commission in Brussels, declined to comment yesterday on Ryanair’s plans to revive the bid. The EU regulator said in 2007 that it couldn’t force Ryanair to sell its remaining stake in Aer Lingus.
“This is an aggressive move by Ryanair and one would think the European Commission would be highly skeptical towards any argument that the merger could be justified based on the financial crisis,” said Douglas Lahnborg, a competition lawyer at Orrick Herrington & Sutcliffe LLP in London.
Ryanair is also facing a full investigation by the U.K.’s Competition Commission of its holding in the smaller carrier after the national regulator said it may lead to higher prices. The Office of Fair Trading, Britain’s lesser antitrust watchdog, asked for the probe earlier this month.
The consolidation of Europe’s major carriers means that Aer Lingus’s future can best be secured within a larger Irish group, O’Leary said in the statement. Should a deal go ahead, Aer Lingus could continue to target a number of “primary” European airports to which Ryanair does not wish to operate, he added.
The purchase of Deutsche Lufthansa AG’s U.K.-based BMI unit by British Airways parent International Consolidated Airlines Group SA is especially relevant to Ryanair’s bid in that it united the biggest carriers at London Heathrow, an airport where there is “little if any opportunity for new entrants,” he said.
With Abu Dhabi’s Etihad Airways having bought 2.99 percent of Aer Lingus last month, Ryanair’s offer will also open up a competition for the government’s holding, maximizing receipts for the cash-strapped Irish state, O’Leary said, adding that Ryanair could alternatively work alongside another investor.
Timmy Dooley, transport spokesman for Ireland’s opposition Fianna Fail party, said in an e-mail that the government should use its stake to block Ryanair and sustain competition.
Morgan Stanley and Davy Corporate Finance are advising Ryanair and Coinside, according to yesterday’s statement, and the offer would be financed from Ryanair’s reserves.
–With assistance from Aoife White in Brussels, Jeremy Hodges in London and Joe Brennan in Dublin. Editors: James Langford, Chad Thomas
To contact the reporter on this story: Chris Jasper in London at [email protected]
To contact the editor responsible for this story: Chad Thomas at [email protected]
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