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Ryanair Makes Hostile Bid for Rival Irish Carrier Aer Lingus

October 06, 2006|From Bloomberg News

Ryanair Holdings, Europe's biggest discount airline, made a hostile bid of 1.48 billion euros ($1.88 billion) for Aer Lingus Group to combine Ireland's two dominant carriers and add routes to the U.S.

Ryanair acquired a 19.2% stake in Aer Lingus and offered 2.8 euros a share for the rest of the airline, 12% more than Wednesday's closing price in Dublin. Aer Lingus and the Irish government, owner of 28.3% of the carrier, rejected the bid, which comes eight days after the airline's initial public stock offering.

Chief Executive Michael O'Leary said Ryanair would reduce fares at Aer Lingus and acquire planes at lower cost by combining orders. The enlarged group would have 50 million passengers a year, helping it compete with British Airways and its partner, Spanish airline Iberia, which have 63 million.

"It makes sense to combine the two Irish airlines so that we can compete with the likes of British Airways, Lufthansa and Air France," O'Leary said. "We can boost Aer Lingus' growth and profits and produce a better return." The two carriers would have separate operations and brands, he said.

The combined group would operate on about 500 routes, competing on only 17. Ryanair would combine purchasing with Aer Lingus to drive down fares and costs.

Together, Ryanair and Aer Lingus handle about 70% of the passengers at Dublin Airport. The takeover would face scrutiny from Irish and European regulators.

"The government is fully committed to competition in the aviation market and it will not be selling its shares in Aer Lingus," Irish Prime Minister Bertie Ahern told lawmakers in Dublin.

Aer Lingus' board unanimously rejected the offer.

"This approach is unsolicited, wholly opportunistic and significantly undervalues the group's businesses," said Aer Lingus Chairman John Sharman, who added, "The offer would raise significant regulatory issues."

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