Ryanair 2009 Annual Report Download - page 74

74
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 €1.40 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 €180 million in cash. The
employee share option trust and employees who own 18% of Aer Lingus would have received over €137 million
in cash. The Company met Aer Lingus management, representatives of the employee share option trust and
other parties. The offer of €1.40 per share represented a premium of approximately 25% over the closing price
of €1.12 of Aer Lingus 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.
On May 21, 2009, Ryanair proposed three resolutions to be put forward at the Aer Lingus annual
general meeting held on June 5, 2009. The first resolution called for a reduction in the non-executive chairman’s
fees from €200,000 to €35,000 per annum. The second resolution called for the non-executive directors’ fees to
be reduced from €45,000 to €17,500 per person per annum (i.e. to rates consistent with those paid to the Aer
Lingus chairman and board members during the fiscal year 2006). Aer Lingus allowed votes on these two
proposed resolutions at the annual general meeting; however, both proposals were rejected by the shareholders.
Ryanair’s third resolution, which sought to enable shareholders to approve in advance severance payments for
executives that resign, was rejected by Aer Lingus and thus not voted upon by shareholders.
The balance sheet value of €93.2 million reflects the market value of the Company’s stake in Aer
Lingus as at March 31, 2009, as compared to a value of €311.5 million as of March 31, 2008. 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 significant influence over Aer Lingus. During the 2008 fiscal year, Ryanair recognized an impairment
charge of €91.6 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 €222.5 million in the 2009 fiscal
year reflecting a fall in the Aer Lingus share price from €2.00 at March 31, 2008 to €0.59 at March 31, 2009.
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 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.”