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Ryanair Launches EUR964 Million Bid To Buy Aer Lingus

LONDON -- Irish airline Ryanair Holdings PLC (RYA.DB) late Tuesday announced a EUR694 million bid to buy rival carrier Aer Lingus Group PLC (EIL1.DB), in a push to create a single, strong Irish airline. The offer comes after Ryanair tried unsuccessfully to acquire Aer Lingus in late 2006 only to have the acquisition blocked by the European Commission on antitrust grounds. Ryanair said it intends to make an all cash offer of EUR1.30 per Aer Lingus share, valuing the target airline at EUR694 million. It already owns 29.82% of Aer Lingus. The offer price represents a 38% premium over the EUR0.94 closing price of Aer Lingus shares on Tuesday and a 47% premium over the average closing price of the stock over the past six months. The offer price is in addition to the EUR0.03 a share dividend declared by Aer Lingus on May 4. Ryanair Chief Executive Michael O'Leary said the offer "represents a significant opportunity to combine Aer Lingus with Ryanair, to form one strong Irish airline capable of competing with Europe's other major airlines The offer is "the best way for Aer Lingus to continue to be owned, controlled and managed from Ireland for the benefit of Irish citizens and visitors," O'Leary said. A spokesman for Aer Lingus couldn't be immediately reached for comment. If the offer is successful, Aer Lingus will be put on a growth trajectory which will allow it to provide strong competition and better consumer choice at a number of Europe's biggest airports where Ryanair doesn't operate, the airline said. The 2007 EU ruling blocking the takeover remains the biggest obstacle facing Ryanair's latest bid. The EU's logic at that time was that Ireland is an island, so travelers have limited options getting to and from it. Ryanair said that "circumstances have changed materially" since that failed bid, and that there are reasons why its new offer should be accepted. Among the key reasons is the trend of airlines consolidating "inexorably", Ryanair said. Ryanair said the air transport market in Europe is consolidating into five large airline groups, led by Air France, British Airways (BA), Easyjet, Lufthansa and Ryanair. It noted that Air France bought a 25% stake in Alitalia, BA merged with Iberia to create IAG and then acquired British Midland; and Lufthansa bought Swiss Air and Austrian Air, as well as taking significant minority stakes in SN Brussels and SAS. "Each of these transactions has been approved by the competition authorities," the airline said. Another reason for the fresh offer is that Dublin Airport is now operating at only 50% capacity compared to full capacity in 2006. Back then it was "difficult for new entrants to offer services or competition to or from Dublin," Ryanair said. But today, the lower capacity "creates significant availability throughout the day, thereby removing this barrier to any new entrants to Dublin Airport." Ryanair also noted that the Irish government has decided to sell its 25% stake in Aer Lingus. "Ryanair's new offer does not require acceptance by the Irish government in order to be successful, although Ryanair believes that this offer represents the only means by which the Irish government can ensure that Aer Lingus will continue to be owned and managed in, as well as focused upon, Ireland," it said. Write to Vladimir Guevarra at vladimir.guevarra@dowjones.com Dan Michaels in Brussels also contributed to this article.

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