The European Commission has laid the legal groundwork for forcing Ryanair to sell some or all of its one-quarter holding in Aer Lingus if the EU turns down its takeover bid, according to a confidential charge sheet.
Sources familiar with the statement of objections (SO) say it concludes that Ryanair would lock up the Irish air market if it acquired the partly State-owned carrier, leading to higher prices for travellers.
The commission will decide by June 13th whether Ryanair can take over Aer Lingus. Ryanair valued Aer Lingus at €1.48 billion in its original unsolicited bid.
"It's fair to say that on the basis of its statement of objections, it looks like the EU is going to block the proposed merger," Ryanair chief executive Michael O'Leary said earlier this week, adding he intended to keep the minority stake anyway.
If it does block the merger, then Brussels would be poised to take the next step and order the sale of some or all of the stock.
The commission says Ryanair bought 19 per cent of Aer Lingus shares less than 10 days before it launched a public bid for its rival and another 6 per cent thereafter.
It now holds 25.17 per cent. The share purchases and the public bid are "considered to constitute a single concentration" under EU merger rules, the charge sheet said, according to sources.
Experts say that legal wording sets the stage for requiring Ryanair to sell off some or all of the Aer Lingus stock. Aer Lingus requires 75 per cent shareholder approval in some matters, which could give Ryanair an effective veto.
For that reason, one lawyer who has not seen the charge sheet believes Ryanair could at most be forced to go below 25 per cent.
Another competition lawyer has argued that the entire stake is at issue. "Was Ryanair trying to acquire control? If so, they can be forced to sell off their stake to put an end to the deal," he said.