Ryanair makes new, half-price bid for Aer Lingus

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By Andras Gergely

DUBLIN (Reuters) - Ryanair revived its tense courtship of Irish rival Aer Lingus on Monday, bidding 750 million euros ($970 million) or just half of what it offered two years ago in an approach thwarted by European regulators.

The European Commission rejected Ryanair's 2006 offer on the grounds it would create a near-monopoly in European flights out of Dublin.

This time, analysts believe a recent spate of airline mergers means the chances of success are greater, even if a takeover would still prove highly contentious in Ireland.

Ryanair , which already owns 29.82 percent of Aer Lingus , said the all-cash offer at 1.40 euros per share represented a 28 percent premium over the average closing price for Aer Lingus shares in the 30 days to November 28, 2008.

Aer Lingus, which strongly opposed the last approach from its neighbor at Dublin Airport, said shareholders should take no action pending further announcements by the company.

The European Commission declined to comment.

By 8:45 a.m. EST, in London, shares in Aer Lingus were trading 14.3 percent higher at 1.28 euros, below a session high of 1.36 euros. Ryanair's shares traded 2 percent lower at 2.87 euros, while the wider Irish market <.ISEQ> was 0.5 percent higher.

Ryanair Chief Executive Michael O'Leary said the economic and regulatory environment had changed markedly since Ryanair's last move on Aer Lingus was blocked by regulators.

"It (Aer Lingus) is increasingly viewed as a small, peripheral airline that has been bypassed by EU consolidation," he told broadcaster CNBC.

The takeover would create a fourth major European airline group after the creation of Air France-KLM , Lufthansa 's buy of Swiss and British Airways' planned tie-up with Iberia , Ryanair said.

FIFTY PERCENT CHANCE

For its latest bid to succeed, Ryanair would also have to overcome opposition from the Irish government and Aer Lingus employees, who respectively own 25 and 14 percent in the airline and rejected Ryanair's last offer.

Transport Minister Noel Dempsey said he would evaluate the offer once Aer Lingus's board had received a formal bid, adding that the government had been holding a "strategic" stake in Aer Lingus partly to prevent hostile bids.

"There is no restriction ... shares can be bought and sold," Dempsey added.

O'Leary said he believed Aer Lingus staff would be more receptive this time given recent job losses at the airline. But the IMPACT union representing Aer Lingus cabin crew and pilots said it had major concerns over jobs prospects and competition.

"It is unlikely on this occasion that the response from Aer Lingus staff would be any different," IMPACT said.

Ryanair said that it would double the size of Aer Lingus's short-haul fleet to 66 over the next five years, creating 1,000 new jobs at the former state airline, which it would keep as a separate brand.

Trade union SIPTU described the offer as "mischief making" by an airline intent on creating a monopoly but analysts at Numis Securities said they believed recent mergers in the sector may have changed the regulatory environment in Ryanair's favor.

"The timing of the bid is interesting given the risk to profitability as recession risks strengthen and the consumer environment deteriorated rapidly in both Ireland and the UK," Numis said in a note.

Analysts at RBS said they believed Ryanair's latest approach would be rejected by Aer Lingus management and that other stakeholders minded to accept would want more money but that it still stood a "notably higher chance of success."

"At this stage we would give the bid 50 percent chance of succeeding -- well up on last time," RBS said.

Ryanair's lower costs and bigger cash reserves have allowed it to cut fares and grow capacity as rivals struggle to cope with recession and volatile fuel prices. Aer Lingus has already announced plans to cut costs, which are up to twice Ryanair's per seat, to stem losses and safeguard its independence.

(Additional reporting by Paul Hoskins in London; Editing by Andrew Macdonald and Rupert Winchester)

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