Ryanair 2012 Annual Report Download - page 79

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significant losses due to the negative impact on market prices of the forced sale of such a significant portion of
Aer Lingus‘ shares.
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 ownership trust and employees, who owned 18% of Aer Lingus, would have received over €137
million in cash. The Company met Aer Lingus management, representatives of the employee share ownership
trust and other parties, including members of the Irish Government. The offer of €1.40 per share represented a
premium of approximately 25% over the closing price of €1.12 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
offer for Aer Lingus.
The United Kingdom‘s Office of Fair Trading (―OFT‖) wrote to Ryanair in September 2010, advising
that it intended to investigate Ryanair‘s minority stake in Aer Lingus. Ryanair objected on the basis that the
OFT‘s investigation was time-barred. Ryanair maintains that the OFT had the opportunity, which it missed, to
investigate Ryanair‘s minority stake within four months from the European Commission‘s June 2007 decision to
prohibit Ryanair‘s takeover of Aer Lingus. The OFT agreed in October 2010 to suspend its investigation
pending the outcome of Ryanair‘s appeal against the OFT‘s decision that its investigation is within time. On
July 28, 2011, the Competition Appeal Tribunal ruled that the OFT was not time barred when it attempted in
September 2010 to open an investigation into Ryanair‘s 2006 acquisition of a minority non-controlling stake in
Aer Lingus. Ryanair subsequently appealed the Competition Appeal Tribunal‘s decision. On November 24,
2011, the UK Court of Appeal ordered a stay of the OFT‘s investigation pending the Courts review of whether
the OFT‘s investigation was time barred. On May 22, 2012, the Court of Appeal found that the OFT was not
time barred to investigate Ryanair‘s minority stake in Aer Lingus in September 2010. Ryanair subsequently
sought permission to appeal that ruling to the UK Supreme Court, but permission was refused. On June 15,
2012, the OFT referred the investigation of Ryanair‘s minority stake in Aer Lingus to the UK Competition
Commission. Ryanair welcomed the decision by the OFT to refer the case to the Competition Commission and
Ryanair anticipates that the Competition Commission will agree with the decision of the European Commission
in 2007 that since Ryanair has neither ―de factor or de jure control‖ in Aer Lingus, that it should not be forced to
sell down its minority stake. The Competition Commission could order Ryanair to divest some or all of its
shares in Aer Lingus, as a result of which Ryanair could suffer significant losses due to the negative impact on
market prices of the forced sale of such a significant portion of Aer Lingus‘ shares.
On June 19, 2012, Ryanair made a third offer to acquire all of the ordinary shares of Aer Lingus it did
not own at a price of €1.30 per ordinary share. The timing of the offer has been influenced by: (1) the continued
consolidation of European airlines, and more recently the International Airlines Group (the parent company of
British Airways) takeover of British Midland International, where the No. 1 airline at Heathrow was allowed to
acquire the No. 2; (2) the additional capacity available at Dublin airport following the opening of Terminal 2
and the decline in traffic from 23.3 million passengers per annum in 2007 to 18.7 million in 2011, has resulted
in Dublin airport operating at approximately 50% capacity; (3) the change in the Irish government policy since
2006 in that the Irish government has decided to sell its stake in Aer Lingus; (4) the fact that under the terms of
the bailout agreement provided by the European Commission, European Central Bank and the International
Monetary Fund to Ireland, the Irish government has committed to sell its stake in Aer Lingus; (5) the fact that
the ESOT (Employee Share Ownership Trust) which at the time of the unsuccessful 2006 offer controlled 15%
of Aer Lingus, has been disbanded since December 2010 and the shares distributed to the individual members,
with the result that Ryanair‘s new offer is, in Ryanair‘s view, capable of reaching over 50% acceptance either
with or without government acceptance; and (6) the fact that recently Etihad, an Abu Dhabi based airline, has
acquired a 3% stake in Aer Lingus and has expressed an interest in buying the government‘s 25% stake in Aer
Lingus (the offer now provides Etihad or any other potential bidder the opportunity to purchase the
government‘s stake). Ryanair is willing to offer the European Commission appropriate remedies to allay
competition concerns and it believes that these remedies, as well as the efficiencies and synergies arising from
the combination, should allow the Commission to approve this proposed merger.