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Ryanair in £1bn Aer Lingus offer Aer Lingus rejects Ryanair offer
(about 2 hours later)
Budget airline Ryanair has launched a 1.48bn euros (£1bn; $1.9bn) bid to buy fellow Irish carrier Aer Lingus. Irish airline Aer Lingus has rejected a 1.48bn euro (£1bn; $1.9bn) takeover offer from budget rival Ryanair.
Ryanair chief Michael O'Leary said the move was a "unique opportunity" to form a "strong" Irish airline. The board of Aer Lingus said the bid "significantly undervalues the group's businesses and attractive long term growth potential".
Ryanair chief Michael O'Leary earlier said the bid was a "unique opportunity" to form a "strong" Irish airline.
A merged group would have a 78% share of the London-Dublin route, raising concerns over competition issues.
Analysts have said the competition issues could be overcome if some routes were shed, but added that Ryanair would probably have to raise its bid significantly.
If the bid was successful, Ryanair said it planned to continue to operate the two airlines separately and compete on the 17 routes which both use.If the bid was successful, Ryanair said it planned to continue to operate the two airlines separately and compete on the 17 routes which both use.
Aer Lingus said it was "considering" the announcement and would make a statement "in due course".
"In the meantime, Aer Lingus Group shareholders are strongly urged to take no action," the airline said.
It's a compelling opportunity for the government, for the staff and more importantly for the Irish economy and tourism Michael O'Leary, Ryanair chief executive From no-frills to flag carrierIt's a compelling opportunity for the government, for the staff and more importantly for the Irish economy and tourism Michael O'Leary, Ryanair chief executive From no-frills to flag carrier
The Irish government, owns 28.3% of Aer Lingus, said it would not sell its shares. However, Mr O'Leary said Ryanair would be "more than happy" for the government to retain its stake.The Irish government, owns 28.3% of Aer Lingus, said it would not sell its shares. However, Mr O'Leary said Ryanair would be "more than happy" for the government to retain its stake.
Earlier this week, Aer Lingus shares were floated on the stock market in London and Dublin. Shares began trading at 2.20 euros each, valuing the firm at 1.13bn euros.Earlier this week, Aer Lingus shares were floated on the stock market in London and Dublin. Shares began trading at 2.20 euros each, valuing the firm at 1.13bn euros.
Global competitorGlobal competitor
Ryanair said it had bought a 16% stake in Aer Lingus and was offering 2.80 euros per share for remaining stocks, a big premium for shareholders.Ryanair said it had bought a 16% stake in Aer Lingus and was offering 2.80 euros per share for remaining stocks, a big premium for shareholders.
News of the takeover approach pushed Aer Lingus shares up 11%, though Ryanair shares fell 2%.News of the takeover approach pushed Aer Lingus shares up 11%, though Ryanair shares fell 2%.
AER LINGUS FACTS Low-cost airline focussing on passenger transportFleet of 35 aircraft 11 routes from Ireland to the UK57 routes from Ireland to mainland EuropeLong-haul flights to US and UAE Aer Lingus share priceAER LINGUS FACTS Low-cost airline focussing on passenger transportFleet of 35 aircraft 11 routes from Ireland to the UK57 routes from Ireland to mainland EuropeLong-haul flights to US and UAE Aer Lingus share price
The flotation followed a decision by the Irish government to sell much of its 85.1% share in the company. Workers now have a 9.85% stake.The flotation followed a decision by the Irish government to sell much of its 85.1% share in the company. Workers now have a 9.85% stake.
If accepted, the Irish Government would get more than 500m euros from the sale and Aer Lingus employees would gain 200m euros, Ryanair said.If accepted, the Irish Government would get more than 500m euros from the sale and Aer Lingus employees would gain 200m euros, Ryanair said.
'Compelling opportunity''Compelling opportunity'
"This offer represents a unique opportunity to form one strong airline group for Ireland and for European consumers", Mr O'Leary said."This offer represents a unique opportunity to form one strong airline group for Ireland and for European consumers", Mr O'Leary said.
"It's a compelling opportunity for the government, for the staff and more importantly for the Irish economy and tourism," the airline boss added."It's a compelling opportunity for the government, for the staff and more importantly for the Irish economy and tourism," the airline boss added.
He said that a combined firm would carry more than 50 million passengers annually and would be "capable of competing on the European and World stage against other large European airline groups".He said that a combined firm would carry more than 50 million passengers annually and would be "capable of competing on the European and World stage against other large European airline groups".
RYANAIR FACTS Fleet of 107 aircraft Orders for a further 281 Boeing 737-800s372 routes 38.9 million passengers in the year to September 2006 Ryanair share priceRYANAIR FACTS Fleet of 107 aircraft Orders for a further 281 Boeing 737-800s372 routes 38.9 million passengers in the year to September 2006 Ryanair share price
Ryanair said that if the deal went through Aer Lingus would be able to cut the price of its short-haul fares and its fuel surcharge.Ryanair said that if the deal went through Aer Lingus would be able to cut the price of its short-haul fares and its fuel surcharge.
It also said it would be able to improve Aer Lingus' long-haul service and its cargo division.It also said it would be able to improve Aer Lingus' long-haul service and its cargo division.
If the takeover went ahead, the two airlines would together operate about 78% of flights between London and Dublin.
The deal could get clearance by competition regulators, but some routes may have to be shed, said Exane BNP Paribas analyst Nick van den Brul.The deal could get clearance by competition regulators, but some routes may have to be shed, said Exane BNP Paribas analyst Nick van den Brul.
"There would almost certainly be a competition investigation by the EU but it doesn't look insurmountable," he said."There would almost certainly be a competition investigation by the EU but it doesn't look insurmountable," he said.
The second largest union at Aer Lingus, Impact, is opposing the proposed takeover saying a stand-alone Aer lingus was "in the best interests of the company, the country, passengers and staff".
"There are clearly significant competition issues involved in the proposed takeover, which would create a near-monopoly on passenger air travel in and out of Ireland with obvious adverse implications for passengers and society," a spokesman added.