O'Leary in Brussels for talks on Aer Lingus offer

 

AER LINGUS’S share price rose by 1.7 per cent yesterday as Michael O’Leary led a Ryanair delegation to Brussels to meet with European Commission officials about its latest offer for its Irish rival.

The Ryanair team, which is understood to have included Juliusz Komorek, director of legal and regulatory affairs, travelled to Brussels to sound out the commission on its latest offer for Aer Lingus, which was lodged on Tuesday.

Ryanair is offering €1.30 a share for Aer Lingus, its third bid for the company since late 2006. Ryanair already owns 29.8 per cent of Aer Lingus. However, as with previous bids, Ryanair faces significant competition hurdles.

The two airlines combined controlled 80 per cent of the traffic at Dublin Airport last year.

The board of Aer Lingus has rejected Ryanair’s latest bid on the grounds that it says it undervalues the business.

The discussions between Ryanair and the commission are thought to have been preliminary in nature. Talks on potential remedies to competition issues would only begin after Ryanair has formally lodged its bid document. The airline has until July 17th to do so.

Ryanair declined to comment on the discussions yesterday.

In 2007, the European Commission blocked Ryanair’s proposed takeover on competition grounds.

Ryanair withdrew its second bid in January 2009 before the commission had considered the matter.

In an interview with Bloomberg Television yesterday, EU competition commissioner Joaquin Almunia said he would not base any future ruling on the previous decision outlawing a merger. “We will need to look into this from scratch.”

He said while he was unaware of Mr O’Leary’s trip to Belgium, such visits were not unusual. “It’s normal. From time to time a company asks for a meeting with me to inform that we have the intention to go ahead.”

A spokesman for the Department of Transport said no meeting had been “held or sought” with either Aer Lingus or Ryanair on this matter.

The Government owns 25 per cent of Aer Lingus and is a pivotal player in any takeover bid.

Mr O’Leary’s latest move follows the Government’s decision this year to sell its stake in Aer Lingus as it no longer considers it to be of strategic importance.

Minister for Transport Leo Varadkar has said the Ryanair bid undervalues Aer Lingus. He is due to discuss the matter at the next Cabinet meeting on Tuesday.

The bid also comes in the wake of Abu Dhabi-based airline Etihad acquiring just under 3 per cent of Aer Lingus’s shares and stating its interest in acquiring the Government’s stake.

It has also emerged this week that Denis O’Brien has acquired additional shares in Aer Lingus in recent months, taking his stake to 3.8 per cent. Mr O’Brien is opposed to a Ryanair takeover of Aer Lingus.

In an interview with Bloomberg television on June 20th, Mr O’Brien said: “I didn’t think it was a great idea for Ryanair to be flying foreign direct investors. Most people, when they come to invest, have a strong impression when they fly on Aer Lingus.”

He said the current bid faces “severe” regulatory hurdles.