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Ireland's Aer Lingus issued a forthright rejection on Friday of a take-over bid by low-cost rival Ryanair and urged its shareholders to snub the offer valuing it at 1.48 billion euros ($1.9 billion).
In a strongly worded letter to shareholders, Chairman John Sharman reiterated the company's view that Ryanair's offer undervalues Aer Lingus and said Europe's biggest budget carrier lacked the know-how to deal with unionised staff.
"Ryanair does not possess the appropriate experience in managing, and demonstrates a hostile attitude towards, a unionised work force and has no experience in managing a long-haul business," Sharman said.
Asked whether a higher Ryanair offer would be more acceptable, Chief Executive Dermot Mannion said it was unlikely. "Let's be unequivocal, I cannot conceive of circumstances in which the Ryanair take-over would be approved by the Aer Lingus board," he told reporters in Dublin after the publication of an 88-page document entitled "Reject the Ryanair Offer".
Mannion said he knew the board had a duty to secure the best possible deal for shareholders but that he believed investors would be better off if Aer Lingus remained independent. "I am very well aware of our fiduciary responsibilities to shareholders. Our value proposition is that we believe fundamentally we can grow shareholder value more going forward as an independent company than can be the case if Aer Lingus is somehow merged into Ryanair," he said.
Ryanair has said that Aer Lingus would remain a separate company if its take-over was successful, with its own management and brand, but that Ryanair would help it to cut costs. Ryanair would benefit from Aer Lingus's superior earnings yield.
Ryanair does not negotiate with unions but has said Aer Lingus, which has a strongly unionised workforce, would be able to operate as at present. Ryanair declined to comment on the Aer Lingus document.

Copyright Reuters, 2006

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