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Last Updated: Wednesday, 5 April 2006, 09:06 GMT 10:06 UK
Easyjet takeover prospects recede
Easyjet plane in flight

The prospects of a takeover bid for budget airline Easyjet appear to have fallen after Icelandic firm FL Group sold its stake in the carrier.

Speculation had risen earlier this year that FL Group, which owns Icelandair, might make a bid for Easyjet after it increased its stake in the airline.

However, FL has now sold its 16.9% stake for about 325m euros ($397m; 228m), making a profit of 140m euros.

It said the proceeds from the sale would be used on new investments.

"FL Group first invested in Easyjet just under two years ago and the investment has proved to be a great success which has provided a foundation on which we have built FL Group," said chief executive Hannes Smarason.

"We are working on several interesting investment projects and the sale gives us the opportunity to look at more projects and some of greater scale."

'Strong' finances

Shares in Easyjet increased sharply in January as speculation swirled about the motive behind FL's stake in the carrier.

As well as owning Icelandair, FL also holds a 10% stake in Finnair and in October last year bought Nordic airline Sterling.

News that FL had sold its stake in Easyjet sent the budget carrier's shares down by more than 8% in morning trade.

FL denied that the recent worries over the strength of Iceland's economy had anything to do with the sale.

Such concerns have hit Iceland's currency and stock market in recent months .

Last week, Iceland's central bank raised interest rates from 10.75% to 11.5% to keep a cap on inflation - the 13th rise in two years.

However, FL Group said that it thought many comments made on the strength of the Icelandic economy "do not take into account appropriately the strong assets that have been acquired by Icelanders abroad".

"FL Group's own financial position remains very strong," it added.

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