EU blocks Ryanair takeover deal for Aer Lingus

Wednesday 27 February 2013 15.23
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Ryanair to appeal EU decision to block Aer Lingus takeover deal
Ryanair to appeal EU decision to block Aer Lingus takeover deal
Aer Lingus boss says Ryanair offer "should never have been made"
Aer Lingus boss says Ryanair offer "should never have been made"

The European Union's competition authority has blocked Ryanair's renewed bid to take over Aer Lingus.

The EU Commission said the merger would harm consumers by creating a dominant company on 46 routes where the carriers are currently competing.

Ryanair said it will appeal the ruling, decrying it as a "political decision" bowing to the interests of the Government. The Government, which holds a 25% stake in Aer Lingus, opposes the takeover bid.

Ryanair, Aer Lingus' biggest shareholder with a 30% stake, first tried to take over Aer Lingus in 2006 but was blocked by the EU Commission.

Ryanair argues the European airline industry is changing rapidly, with regional carriers failing and larger ones merging.

Today's decision was expected after Ryanair said earlier this month the EU Commission had told it of its intention to block the €694m bid to win control of Aer Lingus.

Today's decision was expected after Ryanair said earlier this month the EU Commission had told it of its intention to block the €694m bid to win control of Aer Lingus.

The veto, which is the first time the Commission has twice rejected a proposed takeover, was expected to force Ryanair chief Michael O'Leary to decide whether to finally set its smaller rival free by selling its 30% stake.

But by following through on a threat to try to be the first company in a decade to overturn an EU anti-monopoly decision, Ryanair could tie up the stake for years and stymie the Government's efforts to offload its own 25% holding.

"We believe that we have strong grounds for appealing and overturning this politically-inspired prohibition," a Ryanair spokesman said in a statement.

"We regret that this prohibition is manifestly motivated by narrow political interests rather than competition concerns. Accordingly, Ryanair has instructed its legal advisers to prepare a comprehensive appeal,'' the statement added.

"The Commission's decision protects more than 11 million Irish and European passengers who travel each year to and from Dublin, Cork, Knock and Shannon. For them, the acquisition of Aer Lingus by Ryanair would have most likely led to higher fares," Competition Commissioner Joaquin Almunia said.

Read the Commission's Q&A on the issue

Aer Lingus chief executive Christoph Mueller said it had been Aer Lingus' position from the outset that the offer "should never have been made".

“The series of inadequate remedy offers presented by Ryanair only underlines the view that Ryanair made its offer without any reasonable belief that it could obtain clearance,” he said.

The bid, described by Ryanair as its third and final effort to takeover its rival, included ceding 43 routes to a newly created Irish subsidiary of British airline Flybe and handing to British Airways the routes Aer Lingus operates from London's Gatwick Airport.

The Commission blocked Ryanair's first attempt to take over Aer Lingus in 2007 and Ryanair dropped its second in 2009.

See how Ryanair and Aer Lingus shares are doing on the Dublin Stock Exchange here