LONDON â€" The board Irish airline Aer Lingus is trying to thwart the latest advances of Ryanair.
On Tuesday, Aer Lingus' chairman, Colm Barrington, urged shareholders to reject Ryanair's 694 million euros ($852 million) takeover bid. In a letter to investors, Mr. Barrington said the offer undervalued the Irish carrier and that competition authorities could block a tie-up between the two airlines.
Last month, Ryanair offered to buy the 71 percent stake in Aer Lingus that it did not already own for 1.30 euros-a-share, a 38 percent premium to the share price. But the bid was less than half the 1.48 billion euros that Ryanair first bid for the stake in 2006. The European Commission has previously ruled against Ryanair's efforts to takeover its domestic rival.
“Your board has received legal advice that the European Commission is likely once more to prohibit the Ryanair offer as the number of routes into and out of Ireland that Ryanair would monopolize has s harply increased.†Mr. Barrington wrote to shareholders.
Aer Lingus' chairman also said that Ryanair may be willing to give up slots at London's Heathrow airport to win approval for the deal. Any loss of access to one of the world's busiest airports would jeopardize future growth, he added.
On Tuesday, Aer Lingus said its pretax profit fell 73 percent, 11.4 million euros, during the three months through June 30, compared to the same period last year.
When it launched the bid for its local rival last month, Ryanair said the airline industry had changed significantly since its most recent failed bid in 2008. The low-cost carrier said European officials would take these changes into consideration when making an antitrust ruling.
Ryanair has pledged to keep the two airlines operating separately in one group, but regulators have consistently vetoed a merged group that would control more than 70 percent of the Irish air travel market. British competition authorities also are investigating whether Ryanair's substantial minority stake in Aer Lingus has given it undue influence over the airline's business and strategy.
In early afternoon trading in London, Aer Lingus' share price had risen 1.4 percent.
Rothschild, Goodbody and UBS are advising Aer Lingus, while Morgan Stanley and Davy are advising Ryanair.
