British Airways' parent, International Consolidated Airlines' Group (IAG), has backed the UK competition regulator's ruling that Ryanair should cut its stake in Aer Lingus as it deters potential bids for the Irish carrier.
The UK’s Competition and Markets’ Authority (CMA) has refused Ryanair’s call for a formal review of its 2013 ruling that the low-cost airline should cut its stake in Aer Lingus to 5 per cent from 29.8 per cent.
Ryanair sought the review of the original ruling in February on the grounds that IAG’s €1.36 billion offer for Aer Lingus disproved the CMA’s argument that its 29.8 per cent holding in its rival could put off possible bidders.
However, the CMA provisionally ruled yesterday that there had been no material change in circumstances or special reason not to implement the remedies it had ordered in 2013.
Cut stake
IAG’s general counsel,
Chris Haynes
, wrote to the CMA in March saying likelihood that Ryanair would be forced to cut its stake in Aer Lingus was one of the things that prompted its bid for the Irish airline.
He states that, as IAG explained to the regulator ahead of its original ruling in 2013, the group would not usually consider buying a controlling stake in an airline with a “significant” minority shareholder. “Furthermore, in the absence of support from Aer Lingus’ largest two shareholders, IAG will not be able to meet the 90 per cent acceptance condition to be able to squeeze out any remaining shareholders and take full ownership of Aer Lingus,” he says.
Commitment
“An irrevocable commitment from Ryanair to sell IAG the entirety of its shareholding in Aer Lingus is therefore a prerequisite for IAG being willing to proceed with its current proposal to acquire Aer Lingus.”
Mr Haynes says that, as a result, “there has been no material change of circumstances” since the original ruling.
His letter also urges the CMA to allow Ryanair to accept IAG’s proposed €2.55 a-share offer for its 29.8 per cent holding in Aer Lingus instead of following its normal procedures and appointing a trustee to sell the shares.
Ryanair is barred from selling the shares itself, as the authority has to take control of that process and appoints a “divestiture trustee” to oversee it.
