Page last updated at 21:22 GMT, Monday, 1 December 2008

Aer Lingus rejects Ryanair offer

Ryanair and Aer Lingus aircraft
Ryanair's last offer for Aer Lingus was blocked by the European Commission

Aer Lingus has rejected a hostile takeover bid from Ryanair, dismissing the offer as significantly undervaluing the airline.

Ryanair boss Michael O'Leary has a long standing interest in the Irish flag-carrier with which he hopes to form a major international airline.

His latest offer of 748m euros ($950m; 619m) in cash is just half the amount he offered two years ago.

The Aer Lingus board strongly advised shareholders to reject it.

The airline is "a strong business with significant cash reserves and a robust long term future", it said.

Ryanair's previous offer for Aer Lingus, which valued it at 1.5bn euros, was blocked by the European Commission on competition grounds.

Its judgment said that the combined airline would have controlled more than 80% of European flights to and from Dublin airport.

The airline said that since its last offer was blocked by the Commission, there had been big changes in the sector.

'Marginalised and bypassed'

"The world has changed dramatically over the past two years, as high oil prices and deep recession have caused a flood of airline bankruptcies, consolidations and capacity cutbacks," said Mr O'Leary.

"Aer Lingus, as a small, standalone, regional airline has been marginalised and bypassed as most other EU flag carriers consolidate."

If the deal were to go ahead, both airlines would continue to operate as separate companies with their own brands.

The 1.40 euro offer was a 25% premium above Aer Lingus' closing share price on Friday.

Ryanair already owns 29.82% of Aer Lingus.

Other major shareholders include the Irish government and Aer Lingus employees, both of which rejected the takeover offer last time.

Some analysts said the new Ryanair offer had a better chance of success, despite facing opposition from the unions and possible challenges on competition grounds.

On Monday, before the offer was rejected, Ryanair shares closed down 4.8% at 2.78 euros. Aer Lingus shares were up 13.6% at 1.27 euros.

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