The UK’s Office of Fair Trading (OFT) has launched a merger investigation into Ryanair’s minority stake in Aer Lingus.
After initially acquiring a minority stake, Ryanair launched a public bid for the entirety of Aer Lingus in October 2006. The European Commission investigated the bid and decided to prohibit it in June 2007. In July 2010, the European General Court (the Court) rejected Ryanair’s appeal against this prohibition.
At that time Aer Lingus also applied to the Court for an annulment of a Commission decision refusing to initiate proceedings which would allow the Commission to force Ryanair to sell its shareholding in Aer Lingus in certain circumstances. The Court rejected Aer Lingus’ application and determined that the Commission did not have the ability to force the sale of minority shareholdings that do not confer ‘decisive influence’ (decisive influence being the watermark establishing whether or not the owner of the minority shareholding, through its holding, controls the target company).
Ryanair now owns 29.82% of Aer Lingus. The OFT’s investigation will firstly determine whether it has jurisdiction to review Ryanair’s acquisition of the minority shareholding as a relevant merger situation. A relevant merger situation arises where a minority shareholding gives its owner the ability materially to influence the behaviour and policy of the target company, including the target company’s strategic direction and commercial objectives.
The OFT will then investigate whether the acquisition is likely to give rise to a ‘substantial lessening of competition’. If a substantial lessening of competition is found to be likely then the OFT is under a duty to refer the acquisition to the UK Competition Commission (normally such a reference must be made within 4 months of a merger’s completion or from the time material facts about the merger become public; this can be extended in certain circumstances).
The OFT has written to Ryanair seeking information on the acquisition and has allowed a short period for comments from third parties. Its decision is expected in the coming months.
