Ryanair 2010 Annual Report Download - page 80

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On December 1, 2008, Ryanair made a new offer to acquire all of the ordinary shares of Aer Lingus it
did not own at a price of 11.40 per ordinary share. Ryanair offered to keep Aer Lingus as a separate company,
maintain the Aer Lingus brand, and retain its Heathrow slots and connectivity. Ryanair also proposed to double
Aer Lingus’ short-haul fleet from 33 to 66 aircraft and to create 1,000 associated new jobs over a five-year
period. If the offer had been accepted, the Irish government would have received over 1180 million in cash. The
employee share option trust and employees, who own 18% of Aer Lingus, would have received over 1137
million in cash. The Company met Aer Lingus management, representatives of the employee share option trust
and other parties, including members of the Irish Government. The offer of 11.40 per share represented a
premium of approximately 25% over the closing price of 11.12 for Aer Lingus shares on November 28, 2008.
As the Company was unable to secure the shareholders’ support, it decided on January 28, 2009 to withdraw its
new offer for Aer Lingus.
The balance sheet value of 1116.2 million reflects the market value of the Company’s stake in Aer
Lingus as at March 31, 2010, as compared to a value of 193.2 million as of March 31, 2009. In accordance with
the Company’s accounting policy, this investment is held at fair value. This investment is classified as available-
for-sale, rather than as an investment in an associate, because the Company does not have the power to exercise
any influence over Aer Lingus. During the 2008 fiscal year, Ryanair recognized an impairment charge of 191.6
million on its Aer Lingus shareholding reflecting the fall in Aer Lingus’ share price from the date of purchase to
March 31, 2008. Ryanair recorded a further impairment of 1222.5 million in the 2009 fiscal year reflecting a fall
in the Aer Lingus share price from 12.00 at March 31, 2008 to 10.59 at March 31, 2009. Ryanair recorded an
impairment of 113.5 million in the 2010 fiscal year reflecting a fall in the Aer Lingus share price from 10.59 at
March 31, 2009 to 10.50 at June 30, 2009. The subsequent increase in the Aer Lingus share price from 10.50 at
June 30, 2009 to 10.73 at March 31, 2010 resulted in a gain of 136.5 million, which was recognized through
other comprehensive income. All impairment losses are required to be recognized in the income statement and
may not be subsequently reversed, while gains are recognized through other comprehensive income.
The Company's determination that it does not have control, or even exercise a “significant influence,”
over Aer Lingus has been based on the following factors:
(i) Ryanair does not have any representation on the Aer Lingus board of directors; nor does it have a
right to appoint a director.
(ii) Ryanair does not participate in Aer Lingus policy-making decisions; nor does it have a right to
participate in such policy-making decisions.
(iii) There are no material transactions between Ryanair and Aer Lingus, there is no interchange of
personnel between the two companies and there is no sharing of technical information between the companies.
(iv) Aer Lingus and its principal shareholders (Irish government: 25.1%; Employee Share Ownership
Plan: 14.2%) have openly opposed Ryanair’s investment or participation in the company.
(v) On August 13, 2007 and September 4, 2007, Aer Lingus refused Ryanair’s attempt to assert its
statutory right to requisition a general meeting (a legal right of any 10% shareholder under Irish law). The Aer
Lingus Board of Directors refused to accede to these requests (by letters dated August 31, 2007 and September
17, 2007).
(vi) The European Commission has formally found that Ryanair’s shareholding in Aer Lingus does not
grant Ryanair “de jure or de facto control of Aer Lingus” and that “Ryanair’s rights as a minority
shareholder…are associated exclusively to rights related to the protection of minority shareholders”
(Commission Decision Case No. COMP/M.4439 dated October 11, 2007). The European Commission’s finding
has been confirmed by the European Union's General Court which issued a decision on July 6, 2010 that the
European Commission was justified to use the required legal and factual standard in its refusal to order Ryanair
to divest its minority shareholding in Aer Lingus and that, as part of that decision, Ryanair’s shareholding did
not confer control of Aer Lingus (Judgment of the General Court (Third Chamber) Case No. T-411/07 dated
July 6, 2010).