Jun 20 2012
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Ryanair Bid Is Ploy To Boost Aer Lingus Value - Sources
Wednesday, Jun 20, 2012
By Max Colchester and Jessica Hodgson
LONDON--Ryanair Holdings PLC's (RYA.DB) cash offer for Aer Lingus Group PLC (EIL1.DB) is a ploy to maximize the market value of the rival Irish airline in which the budget carrier already holds a near 30% stake, according to people close to Aer Lingus.
Late Tuesday Ryanair, Europe's leading budget airline by passenger numbers, announced a EUR694-million bid to buy Aer Lingus in an apparent effort to tighten its grip over the Irish airline market. This is the third time that Ryanair has tried to snap up Aer Lingus in a protracted battle marred by skirmishes with regulators across the continent.
The bid, priced at a 38.3% premium to Aer Lingus' closing share price Tuesday, comes as the cash-strapped Irish government has put its 25% stake on the block amid Europe's enduring financial crisis which has contributed to a sharply worsening performance by the region's national airlines in the past year.
People close to Aer Lingus suspect that Ryanair's latest takeover approach is an effort to drum up interest in and ramp up the price of its holding in the carrier ahead of a potential sale.
A spokesman for Aer Lingus declined to comment. A spokesman for Ryanair declined to comment beyond Tuesday's statement.
Irish Taoiseach Enda Kenny Wednesday questioned how selling Aer Lingus to Ryanair would affect competition in the Irish market, according to a government spokesman.
The European Union's antitrust regulator will examine the new bid once the company files a notification, a European Commission spokesman said.
In its statement, Ryanair said that "circumstances have changed materially" since its last failed bid, and that there are reasons why its new offer should be accepted.
Ryanair Chief Executive Michael O'Leary said the offer "represents a significant opportunity to combine Aer Lingus with Ryanair, to form one strong Irish airline capable of competing with Europe's other major airlines.
The offer is "the best way for Aer Lingus to continue to be owned, controlled and managed from Ireland for the benefit of Irish citizens and visitors," O'Leary said. Mr. O'Leary declined to comment further.
Last week the U.K. the competition watchdog launched an investigation into whether Ryanair used its minority stake in Aer Lingus to weaken it ability to compete. The watchdog is expected to publish a ruling in November this year.
The U.K competition Commission has the power to force Ryanair to sell its stake in Aer Lingus, a spokesman for the regulator said.
Analysts say that a deal would offer Ryanair significant synergies in Ireland but that the benefits of the deal would be limited.
"Assuming that there is an agenda beyond revenge on this one, the only way it makes sense is if O'Leary wants to do something else, like say a long-haul operation," says Andrew Charlton at Geneva-based consultancy Aviation Advocacy.
Mr. O'Leary is likely to venture into the long-haul business only when he can secure the necessary wide-body aircraft at cheap enough rates, analysts said.
Teresa Hannick, an Aer Lingus Union representative, said that workers had been assured by Irish members of government that there would be "no fire sale."
Prospects of a sale have been previously dampened by a dispute over Aer Lingus' share of an estimated EUR600-million pension deficit divided among several Irish employers including the airline, the Dublin Airport Authority, and a maintenance repair company. A spokesman for Aer Lingus said the company is not directly liable for the pension deficit.
Officials at Etihad weren't available for comment.
Write to Max Colchester at email@example.com
Alessandro Torello in Brussels contributed to this article.
(END) Dow Jones Newswires
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