Ryanair’s takeover bid set to be rejected

THE European Commission will announce its rejection of Ryanair’s proposed purchase of rival airline Aer Lingus in the next month, sources close to the deal suggested yesterday.

The blocking of Ryanair’s unsolicited offer, originally valued at €1.48 billion, will be only the 20th such decision in more than 3,000 cases reviewed by the European Union’s executive arm since 1990.

The EU’s competition department prepared a proposed decision to present to the full commission before a July 4 deadline after a market test found Ryanair’s latest proposed remedies for competition problems were insufficient.

Ryanair chief executive Michael O’Leary has said he would challenge the commission in court if the deal were turned down.

The decision runs to more than 300 pages and aims to deal with issues that may end up in court, one commission source said.

Commission competition spokesman Jonathan Todd declined to comment on the investigation until a final decision is taken.

In a confidential charge sheet — known as a statement of objections — in March, the EU regulator said it was concerned about the deal’s impact on competition, especially at Dublin airport.

It noted Aer Lingus and Ryanair were head-to-head rivals and the number of routes on which they competed had risen from eight to 37 in the past six years with Ryanair dealing with 43% of Dublin airport’s passenger traffic compared to Aer Lingus’ 37%.

Ryanair, whose bid automatically lapsed when the commission launched an in-depth investigation of the deal in December, said in a confidential offer it would make space for a new rival to base as many as six planes at Dublin airport.

Ryanair also offered to sell Aer Lingus’s slots at London’s Heathrow and Dublin for flights between the two airports.

The commission, however, considered that would not solve the problem.

Even if the commission had approved the Ryanair deal there would have been problems because the Irish government, which holds 25% of Aer Lingus, opposed the transaction. So did several other stockholders.

Michael O’Leary at one point said the company would consider a second bid for Aer Lingus if Ryanair received a favourable outcome from the EU review.

Once the deal is blocked, however, the European Commission may not be finished with Ryanair.

It has laid the legal groundwork to force Ryanair to sell some, or all, of its quarter holding in Aer Lingus. Mr O’Leary has always said he intends to keep the 25%.