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Offer described as a "rip off"
Aer Lingus today (December 22) published its formal defence document rejecting rival Ryanair's €748m hostile bid for the carrier.
The directors said the bid "significantly undervalues Aer Lingus" and unanimously recommended shareholders to reject it.
The Ryanair offer amounts to €1.40 per share.
Colm Barrington, Aer Linguis's chairman described the offer as a "rip off."
Ryanair's previous offer in 2006, also rejected by Aer Lingus, valued the carrier at €1.5bn or €2.80 per share.
The Irish national carrier said in its document that it was a profitable business with a clear strategy for growth.
It said it had unmatched financial strength, had delivered on its promises, had a vibrant future and did not need the low cost carrier.
In a letter to the shareholders, Aer Lingus chairman Colm Barrington said: "The offer fundamentally undervalues Aer Lingus, its robust financial position and strong growth prospects.
"The offer also misrepresents the significant progress of Aer Lingus since the IPO in 2006 and seeks to undermine Aer Lingus' vibrant future as an independent airline."
The shareholders include the Irish government which has a 25% stake and the Aer Lingus employees who own 14% as well as Ryanair which has a 29.82% holding.
Mr Barrington said the airline was growing a new base at London Gatwick Airport serving eight destinations due to open next April.
He said the airline, despite the tough conditions, expected to make a profit this year.
Mr Barrington added: "We expect that significantly reduced fuel prices and a number of management cost reduction initiatives will enable Aer Lingus to continue to enhance profitability in 2009 and beyond."
He said the carrier had a "a strong balance sheet - one of the strongest in the industry - with total cash reserves of €1.3bn and net cash of €803m.
"Ryanair seeks to pay other shareholders €525m to acquire control of Aer Lingus in order to gain access to this €1.3bn cash balance.
"For this reason alone, the offer is worthy of rejection. That is before considering the market value of our owned fleet of €601m."
In his letter Mr Barrington then hit out at Ryanair and its operating methods.
"Ryanair has no experience of managing a long haul business. Ryanair has no experience of managing a business that offers a superior customer proposition. In fact, it delights in not doing so.
"Ryanair has no experience of managing a unionised workforce in Ireland, and has publicly ridiculed and shown its contempt for employee unions.
"Ryanair's entire experience and focus has been on developing a low fares, low service short haul product.
"Ryanair claims that Aer Lingus needs Ryanair to survive and to continue to grow. This is emphatically not the case.
"Aer Lingus has grown strongly in the face of direct and aggressive competition from Ryanair for over twenty years.
"Ryanair seeks to gain opportunity and value from what Aer Lingus has created.
"Ryanair's proposition is simple - it is opportunistically attempting to capitalise on current market fears and uncertainties to profit from our proven business model and gain access to our huge cash resources and valuable assets.
"Do not let this rip-off happen."