The Government has decided not to accept the Ryanair offer of €1.40 per share for its 25 per cent shareholding in Aer Lingus, Minister for Transport Noel Dempsey said today.
Ryanair said it was disappointed with the decision and acknowledged that its bid for the airline could not now succeed, as it could not achieve the requisite acceptance from Aer Lingus shareholders by next week's deadline.
The Minister said the decision was taken on the basis that the cash offer greatly undervalues Aer Lingus and that a merger on the basis proposed would be likely to have a significant negative impact on competition in the market.
The offer by Ryanair did not include any proposed remedies for the virtual monopoly which would result if the offer was accepted.
"There were a number of other issues considered by Government in coming to this decision. Competition was a major consideration. The cornerstone of Irish aviation policy is and has been for many years, to encourage competition. Because we live on an island Irish consumers depend very heavily on air transport. A monopoly in this area would not be in the best interests of Irish consumers," said Mr Dempsey in a statement.
Ryanair said in response it was disappointed by the Government's decision, but that it would "respect and abide by" that decision, which meant that Ryanair's offer would not be successful, since its 90 per cent acceptance condition could not be satisfied.
"Ryanair believes the Government's decision is a wrong one, as this cash offer greatly exceeds the intrinsic value of Aer Lingus," Ryanair said in a statement.
It said the Government's decision also meant that Ryanair's plan to double the size of Aer Lingus' short-haul fleet and create 1,000 new Aer Lingus jobs could not now proceed.
Ryanair chief executive Michael O'Leary said:"We will respect and abide by the Government's decision. We don't think it is in the best interests of Aer Lingus, which will be isolated as a small, peripheral, loss making airline, reduced to announcing so called 'partnerships' with other loss makers like United Airlines.
"It is strange, when the Irish Government is looking for €2 billion in cost savings, that it would reject an offer of
€188m for its 25 per cent stake in Aer Lingus. It is also sad, when thousands of jobs are being lost in Ireland, that
Ryanair's offer to create 1,000 new Irish jobs in Aer Lingus over the next five years has been rejected.
"We would like to thank the Government and other Aer Lingus shareholders for the time and consideration they have given to our offer over the past seven weeks."
He said Ryanair would now focus all its energies on continuing to successfully grow and develop its own airline.
Ryanair had earlier ruled out any big rises in its €1.40 a share offer for Aer Lingus as the January 30th deadline for acceptance approached.
The airline said it will only raise its €748 million cash offer if a substantial number of Aer Lingus owners say they would be willing to accept a higher offer.
Aer Lingus, meanwhile, said it would build on its codeshare agreement with United Airlines to launch a new route between Madrid and Washington Dulles, which it later plans to develop into a full joint venture company with at least three long-haul aircraft.
Additional reporting: Reuters