Ryanair's new bid for Aer Lingus suffers setback

DUBLIN — Ireland's competition authority dealt Ryanair's renewed bid for Aer Lingus a severe blow Friday, ruling that its most recent promises to woo shareholders violate takeover laws.

The Irish Takeover Panel ordered Ryanair to withdraw two key pledges to the Irish government — the second-largest Aer Lingus shareholder with a 25.1 percent stake — that offered to give the government control of the airline's Heathrow slots and a euro100 million ($130 million) guarantee.

The competition authority said Ryanair's sales pitch was illegal, because its special pledges to the government "constitute arrangements with an Aer Lingus shareholder containing favorable terms which were not being extended to all Aer Lingus shareholders."

Ryanair and its primary takeover advisers, Morgan Stanley and Davy Stockbrokers in Dublin, said in a statement they "strongly disagree with the decision of the Takeover Panel."

Nonetheless, Ryanair said it would revise its sales pitch and ensure "delivery of these benefits and guarantees in a form consistent with the constraints imposed by the Irish Takeover Panel."

Ryanair is the biggest Aer Lingus shareholder with 29.8 percent — and this month launched a new offensive to persuade the government and Aer Lingus employees to part with their shares.

On Dec. 1, Ryanair Chief Executive Michael O'Leary offered euro1.40 ($1.90) a share, a 25 percent premium over the price at the time. Three days later, O'Leary sought to sweeten the deal with new commitments addressed at others' anxiety about a Ryanair-run Aer Lingus.

O'Leary promised to give the government veto power over whether Aer Lingus' most strategic asset — its ownership of slots at London's Heathrow Airport — could be sold. The government says retention of the Heathrow slots is important to Ireland's economic future.

O'Leary also offered a euro100 million bank guarantee that would be paid to the government if Ryanair failed to meet its pledges to lower Aer Lingus charges and increase its work force by 1,000 within three years.

The competition panel — which includes representatives from Irish banks, stockbrokers, accountants and law firms — said Ryanair also should revise or withdraw two other pledges apparently directed at Aer Lingus employees, the third-largest shareholder.

O'Leary said Ryanair would recognize the authority of labor unions active in Aer Lingus, and would reopen Aer Lingus services between Heathrow and Shannon, the major airport in western Ireland. Both moves would appeal to Aer Lingus workers.

Ryanair refuses to negotiate directly with unions, which are entrenched in Aer Lingus' work force. Aer Lingus' surprise decision last year to slash Shannon services in favor of a new base in the British territory of Northern Ireland infuriated Aer Lingus employees.

The Irish Takeover Panel said Ryanair should withdraw those pledges unless it clarifies "to whom the commitments are being given," and involves no favoritism to a particular group of shareholders.

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On the Net:

Irish Takeover Panel, http://www.irishtakeoverpanel.ie/

Ruling, http://www.ise.ie/app/announcementDetails.asp?ID2046421

Ryanair offer, http://tinyurl.com/5g4fw7

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Ryanair revises pitch to acquire Aer Lingus

Associated Press

Thu Dec 11

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