Findings oppose Ryanair bid to take over Aer Lingus

The prospect of Ryanair taking over Aer Lingus receded last night as the European Commission formally expressed its concern about…

The prospect of Ryanair taking over Aer Lingus receded last night as the European Commission formally expressed its concern about the low cost airline's takeover bid, writes Jamie Smythin Brussels.

In a 265-page statement of objections sent to Ryanair, the commission concluded that the proposed merger was "likely to significantly impede effective competition".

It added that a takeover of Aer Lingus by Ryanair would "eliminate the most credible potential entrant" to compete on 37 airline routes to and from Dublin airport.

Ryanair strongly criticised the commission's assessment of its bid for Aer Lingus last October and what it described as a "leak" of confidential information to the media.

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Ryanair said it "seriously questioned" the objections raised by the commission and that the findings suited the political interests of the Government, which opposes the bid, rather than the best interests of consumers. The "bizarre" findings flew in the face of a wave of consolidations taking place in the EU airline industry. This merger should be approved without further delay or interference, Ryanair said in a statement.

Earlier yesterday Bloomberg Newsreported that it had obtained a copy of the statement of objections prepared by the commission's competition directorate.

A commission spokesman would not comment on the report.

However, EU sources later confirmed that the statement had been sent to Ryanair this week. Aer Lingus has not yet been furnished with a copy of the objections. It will receive the document when Ryanair strikes out any confidential material contained in it.

Ryanair will now be given an opportunity to rebut the charges contained in the statement. It will also be given the opportunity to have a closed hearing on the case with officials from the competition directorate of the commission.

On October 23rd last year Ryanair acquired a 19.2 per cent stake in Aer Lingus and offered €2.80 a share for the rest of the company. The bid lapsed in December when the EU began a 90-day investigation into the proposed takeover.

However, Ryanair chief executive Michael O'Leary has indicated that he would table a new bid for Aer Lingus if the commission cleared the proposed merger.

The commission is due to issue its final decision on the proposed takeover on 13th June when it must decide if the bid will be rejected automatically, or whether the problems can be addressed through some potential remedies or changes to the bid.

John Sheehan of NCB Stockbrokers said the statement of objections was probably "indicative of thinking at EU level", which raised the question of the consequences posed by a blocked deal. He did not see Ryanair selling its 25.2 per cent stake in Aer Lingus as it was of strategic value because it could block another rival bidder.

However, it is possible that the commission could order Ryanair to sell its stake if it decides to block the merger.