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The Deal: Ryanair Files Appeal Against Aer Lingus Selldown Order

NEW YORK ( TheStreet) -- Dublin-based low-cost carrier Ryanair Holdings (RYAAY - Get Report) on Tuesday, Sept. 24, appealed against the U.K. Competition Commission's ruling that it must slash its stake in domestic rival Aer Lingus Group.

The appeal comes a month after the Competition Commission ordered Ryanair to reduce its holding in Aer Lingus from 29.8% to 5%, amid concerns that Ryanair was in a position to interfere with Aer Lingus' commercial strategy and policy in several ways, including blocking Aer Lingus from being acquired by or combining with another carrier.

Ryanair's 29.8% stake is worth about 240.27 million euros ($324.2 million), based on Aer Lingus' market value of 805.74 million euros.

Its appeal in the U.K. also comes as its separate appeal remains pending against the European Commission's February veto of a hostile takeover bid for Aer Lingus, which is 25.1% owned by the Irish government.

In Tuesday's appeal to the U.K.'s Competition Appeal Tribunal, Ryanair argued that the Competition Commission was wrong to order a divestiture as long as Ryanair's appeal against the European Commission decision remained pending.

Ryanair, represented in the U.K. appeal by Nicholas Levy and Paul Gilbert of Cleary Gottlieb Steen & Hamilton, also argued that the U.K. Competition Commission's procedure was unfair because it was based on evidence and allegations kept secret from Ryanair.

"In particular, the Commission withheld evidence that it relies upon to establish that, absent Ryanair's minority shareholding, other airlines would have or would have in the foreseeable future entered into combinations with Aer Lingus," according to a summary of the appeal.

It further argued that the Commission failed to show a causal link between Ryanair gaining "material influence" over its rival's policy and the finding of a substantial lessening of competition.

Ryanair said the relief it is seeking will depend on the grounds on which its appeal is upheld, and suggested several scenarios, including canceling the divestiture order and canceling the Competition Commission's entire report.

The two airlines have been duking it out since Ryanair took a minority stake in October 2006, three days after Aer Lingus went public. Both appeals are likely to drag on for some time.

-- Written by Renee Cordes in New York

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