Ryanair, the no-frills airline based in Ireland, has submitted its formal bid to buy out the Irish flag carrier Aer Lingus.
The bid, however, is opposed by Aer Lingus, which says Ryanair "undervalues the airline", and by Ireland's government.
Etihad Airways, which owns almost 3 per cent of Aer Lingus, did not comment yesterday. However, earlier this month, the Etihad chief executive, James Hogan, ruled out offloading its stake.
"We are not selling," Mr Hogan told the Financial Times in London. "We have invested due to our view of the Aer Lingus business model and the success the management are having implementing that model. We continue to support that management team."
Ryanair, which owns 29.8 per cent of Aer Lingus, offered to buy remaining stock for €1.30 a share in cash, equivalent to a 38 per cent premium on the share value at the close on June 19, the day before Ryanair stated it intended to bid. The bid is worth €694 million (Dh3.13 billion).
The Irish government has said it planned to auction its own 25 per cent Aer Lingus stake later this year and analysts have predicted Etihad will be interested in increasing its holding.
Ryanair announced last month it would make a third attempt to acquire Aer Lingus. At the time, the former state-owned carrier urged shareholders to reject it.
"The board, having considered the offer with its advisers, believes the offer, even if it is capable of completion, undervalues Aer Lingus," an Aer Lingus spokesman said.
"The board notes that Ryanair's unsolicited offer in 2006 was blocked by the European Commission and was not capable of completion and that Ryanair's second offer, in 2008, was withdrawn. Consequently, there is significant uncertainty that any offer from Ryanair, if made, would be capable of completion."
Earlier, the Irish prime minister Enda Kenny said the government would not be forced into any "fire sale" of its remaining share in the airline.
Ryanair began building its stake in Aer Lingus in 2006 but had its initial takeover bid blocked by European competition regulators in 2007 on the grounds that it would enable Ryanair to control 80 per cent of traffic in and out of Dublin International Airport.
Ryanair lost an appeal against the ruling in 2010.
Ryanair's interest in taking over Aer Lingus is also under investigation by the UK competition commission because of its likely impact on airfares in and out of UK airports.
However, in a letter accompanying the bid, the Ryanair chief executive Michael O'Leary pointed out Aer Lingus had run up losses of €91m since it became a public company in 2006.
He pledged to help lift Aer Lingus' annual passenger total to 14 million over five years from 9.5 million today and said Ryanair would also invest in expanding trans-Atlantic flights.
Aer Lingus traded 1.4 per cent higher at €1.07 yesterday lunchtime in Dublin, where both carriers are based, taking the gain this year to 69 per cent. That is 23 cents below the offer price and values Aer Lingus at €568m.
Ryanair, which is making the new bid via its wholly-owned subsidiary Coinside, has a market value of €5.96bn. The company is seeking acceptances for the bid by September 13.
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