Ryanair's Bid for Aer Lingus 'Hard to Comprehend'

Posted 07 October 2006 @ 09:10 am EET     Print     Reprint     E-Mail     Comments

DUBLIN (AP) - Ryanair's surprise hostile takeover bid for Aer Lingus is difficult to understand given that the state plans to retain a blocking minority in the company, Irish Transport Minister Martin Cullen said.

The government is committed to maintaining its share of at least 25.1 percent in recently privatized Aer Lingus which is designed "among other things, to block any hostile takeover attempt," he said in a statement.

"Even if another company buys up a majority share, Aer Lingus would have to continue to operate on an independent financial basis.

"Against the backdrop where the company cannot be de-listed, the announcement by Ryanair is hard to comprehend.

"Without delisting, and operational integration with Ryanair, it is hard to see how the synergies which motivate mergers and takeovers could be realized.

"The information put out by Ryanair does not resolve this fundamental question. Ryanair investors must be unsure what this is all about," Cullen said.

The 25.1-percent share ensures that another company cannot acquire the 75 percent threshold that is required to force a de-listing and the threshold cannot be changed without the consent of the state.

The statement by Cullen said that one possible reason for the bid of 1.481 billion euros (1.883 billion dollars) is that Ryanair's move is a defensive ploy to tackle the threat of competition

"What Ryanair is suggesting is a return to a monopolistic situation. A new monopoly in the provision of air services would be bad for business, the country, the consumer, the travelling public and tourism interests."

Cullen also suggested that a Ryanair takeover might also violate conditions in an Ireland-US bilateral air agreement.

"That agreement requires that any airline designated by Ireland to provide transatlantic services must be majority owned and controlled by Irish nationals.

"There is a serious risk that the merged entity that Ryanair envisages would not meet that requirement and that is something that would need to be legally reviewed and ultimately may need to be discussed with the US authorities and the Irish government."