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Ryanair's bid is grounded

The European Union's highest court yesterday upheld a 2007 decision by the European Commission to block Ryanair's €1.5bn hostile takeover bid for Aer Lingus on the basis that the move would have significantly impeded competition on 35 routes, and adversely affected consumers.

But in denying Ryanair's appeal, the general court of the European Court of Justice separately dismissed an appeal by Aer Lingus, which had asked the court to overturn a European Commission decision which stated that Ryanair couldn't be forced to sell its 29.8% stake in Aer Lingus under EU merger regulations.

Aer Lingus stated yesterday that it will consider the judgement in detail before deciding whether to make a further appeal to the European Court of Justice.

By not forcing Ryanair to sell its stake, the court decision leaves Aer Lingus in a position where securing any third-party interest in the airline remains a Herculean task.

Any other airline that was interested in acquiring Aer Lingus would have to negotiate with Ryanair, which could block any takeover move.

However, Ryanair chief executive Michael O'Leary has said on previous occasions that he would be willing to sell Ryanair's stake in Aer Lingus if he believed the price was right.

Ryanair had appealed the 2007 European Commission ruling blocking its original bid, but despite this it proceeded with a second takeover attempt of Aer Lingus in 2008, which also failed after the Government, which owns 25% of the airline, rejected the €1.40-a-share offer.

In making its first bid, in 2006, just days after Aer Lingus floated on the stock market, Ryanair offered €2.80 per share.

Aer Lingus shares are currently trading at just above 80 cent.

Ryanair spent roughly €400m accumulating its stake in Aer Lingus, and has written off most of it, valuing the holding at just under €100m.

Mr O'Leary said yesterday that the court's ruling would not prevent Ryanair from making a third bid for Aer Lingus, but added there were no immediate plans for such a move.

"In any event, [it] would be unlikely to succeed unless the Irish Government decides to sell its 25% stake," he added.

Aer Lingus chairman Colm Barrington yesterday welcomed the court's ruling on Ryanair's original bid.

"It is regrettable that the court has not taken this opportunity to take the further step necessary to address the anti-competitive effects of Ryanair's minority shareholding in Aer Lingus, which is contrary to the interests of the majority of our shareholders."