EasyJet Responds to US Takeover Interest
EasyJet has described a potential £3bn takeover bid from a US investment group as “highly opportunistic,” while its shares surged to their highest level in three months following the takeover speculation.
The US private credit firm Castlelake announced on Friday that it was considering a takeover offer for the budget airline. On Monday, Castlelake revealed it had acquired a 2.14% stake in EasyJet and indicated that any offer would value the company at a minimum of 403p per share, equating to approximately £3bn in total.
EasyJet criticised the timing of the potential bid, stating it was
“highly opportunistic timing”due to the airline’s share price being
“temporarily depressed due to the current situation in the Middle East and its impact on customer confidence and jet fuel prices”.
Prior to the takeover interest becoming public, EasyJet’s shares had declined by about 20% since the start of the year. Despite this, the company expressed confidence in its strategy, citing its strong cash position and positive profit outlook.
Share Price Reaction and Takeover Rules
Following the announcement, EasyJet shares rose by as much as 12% in early trading on Monday, reaching 444.7p. This price was well above Castlelake’s proposed minimum offer and marked the highest share price since 2 March, valuing the airline at roughly £3.4bn. The share price later moderated, closing with an approximate 10% increase.
Under City takeover regulations, Castlelake, which is based in Minneapolis and manages assets worth $36bn (£27bn), has until 5pm on 26 June to declare whether it intends to proceed with an offer for EasyJet.
EasyJet stated it would
“consider any proposal, should one be made”but highlighted
“considerable regulatory, financial and other execution challenges associated with a potential takeover”.
European Union rules require that European airlines be majority-owned by investors within the region. Ruairi Cullinane, an analyst at RBC Capital Markets, commented that these regulations
“could, at the very least, complicate a takeover of EasyJet by Castlelake, if acting alone”.
Previous Takeover Interest and Company Background
This is not the first occasion EasyJet has attracted acquisition interest. In October, reports surfaced regarding potential buyers, and in 2021, the airline rejected an approach from a rival company.
Headquartered in Luton, EasyJet employs over 16,000 people worldwide and ranks as one of Europe’s three largest budget airlines, behind Ryanair and ahead of Wizz Air in third place.
The airline was founded by billionaire Stelios Haji-Ioannou, who remains the largest single shareholder with approximately a 15% stake. Haji-Ioannou declined to comment on Monday.
Castlelake’s Industry Presence and Market Implications
Castlelake already holds a significant presence in the airline sector, having provided loans to Scandinavian airline SAS and Virgin Atlantic Airways.
Susannah Streeter, chief investment strategist at Wealth Club, observed that
“Castlelake clearly believes the market may be underestimating EasyJet’s longer-term earnings potential and the resilience of its network.”
A successful takeover of EasyJet would represent another notable loss for London’s struggling stock market, which has recently seen several companies, including construction equipment rental firm Ashtead, gambling group Flutter Entertainment, and building materials supplier CRH, exit the public markets.
Streeter added:
“This is fresh evidence that the British markets are increasingly becoming a hunting ground for sophisticated institutional investors, with UK-listed stocks continuing to trade at lower valuations than other markets.”
