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Ryanair faces uphill battle to acquire rival suggests JP Morgan

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Ryanair’s (LON:RYA) chances of getting EU approval to buy Aer Lingus ( LON:AERL) are not high suggests JP Morgan, but that may not be bad news for its shareholders.

The European authorities announced yesterday that they were to launch a Phase II inquiry into the bid, forcing Ryanair to lapse its offer.

However, the no-frills airline said it would re-bid if it gets the go-ahead from Europe.

The US broker doubts this will happen after comments from the European Commission that competition concerns had increased since it rejected Ryanair’s first attempt to buy its rival in 2007.

JPM also said that while buying Aer Lingus would be a low risk move given its strong balance sheet and good underlying margins, the deal may not benefit Ryanair shareholders.

The broker said it cannot see the strategic rationale in a low-cost carrier such as Ryanair buying a legacy carrier such as Aer Lingus unless it is a way for Ryanair to hedge its US$ costs with Aer Lingus' US$ revenues. 

At least part of Ryanair’s investment thesis is also predicated on returning excess cash to shareholders, something the broker believes may be potentially be less likely if it acquired Aer Lingus.

Shares in Ryanair today rose 0,03c to €4.16, while Aer Lingus dipped slightly to €1.07. 

Quick facts: Ryanair Holdings plc

Price: 9.58 EUR

LSE:RYA
Market: LSE
Market Cap: €10.46 billion
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