Ryanair Holdings PLC's surprise hostile takeover bid for Aer Lingus Group PLC is difficult to understand given that the state plans to retain a blocking minority in the company, Irish Transport Minister Martin Cullen said on Friday.
The government is committed to maintaining its share of at least 25.1 percent in recently privatized Aer Lingus which is designed "among other things, to block any hostile takeover attempt," he said in a statement.
"Even if another company buys up a majority share, Aer Lingus would have to continue to operate on an independent financial basis. Against the backdrop where the company cannot be de-listed, the announcement by Ryanair is hard to comprehend," he said.
"Without delisting, and operational integration with Ryanair, it is hard to see how the synergies which motivate mergers and takeovers could be realized," Cullen said.
While the government insisted it would retain a minimum 25.1 percent stake -- the minimum required to block any attempt by a majority owner to have the company de-listed from stock markets, Ryanair CEO Michael O'Leary said that he would not mind having the government as a minority holder, because Ryanair's bid requires only 50.1 percent share ownership to take control.
The statement by Cullen said that one possible reason for the bid of 1.481 billion euros (US$1.883 billion) is that Ryanair's move is a defensive ploy to tackle the threat of competition
"What Ryanair is suggesting is a return to a monopolistic situation. A new monopoly in the provision of air services would be bad for business, the country, the consumer, the travelling public and tourism interests."
Cullen also suggested that a Ryanair takeover might also violate conditions in an Ireland-US bilateral air agreement.
"That agreement requires that any airline designated by Ireland to provide transatlantic services must be majority owned and controlled by Irish nationals," he said.
"There is a serious risk that the merged entity that Ryanair envisages would not meet that requirement and that is something that would need to be legally reviewed and ultimately may need to be discussed with the US authorities and the Irish government," Cullen said.
Aer Lingus CEO Dermot Mannion, who broke off a holiday in the United States to return to Dublin, said on Friday he was certain that the Ryanair bid would fail and Aer Lingus would remain independent.