Ryanair signals surrender in Aer Lingus battle

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Ryanair signalled the end of its hostile bid for the rival Irish carrier Aer Lingus yesterday by saying that it would not raise its €1.48bn (£1bn) offer.

Michael O'Leary, the chief executive of the no-frills airline, told Aer Lingus shareholders in a letter that the strategy being pursued by its management could not lift the share price above the €2.80 being bid by Ryanair. "Accordingly, Ryanair confirms that it will not increase its offer of €2.80 per Aer Lingus share," Mr O'Leary added.

With almost 40 per cent of Aer Lingus shareholders opposed to the bid as it stands, Ryanair's refusal to lift the offer price spells the end, to all intents and purposes, of the takeover attempt.

Under Irish takeover rules, Ryanair cannot return with another bid. Mr O'Leary said a fortnight ago that he did not believe the bid would succeed, in which event Ryanair would retain the 19.1 per cent stake in Aer Lingus it has built up and continue as a "long-term and vocal shareholder".

The Irish government, which still owns 25 per cent of Aer Lingus, has already come out against the Ryanair bid and the airline's Employee Share Ownership Trust, which holds a further 13 per cent, is expected to do likewise when the result of a ballot among members is announced later today.

The surprise bid for Aer Lingus came less than a week after the company's successful debut on the London and Dublin markets at the end of September and valued the airline at a 27 per cent premium to its €2.20-a-share flotation price.

Aer Lingus shares rose as high as €3.05 in the aftermath of the bid in the expectation that Ryanair would increase its offer. Last night, they closed 3 per cent lower at €2.66.