LONDON — EasyJet shares rose 10 per cent on Monday after Castlelake said it was considering a potential takeover bid, with the British budget airline calling the U.S. investment firm’s timing “highly opportunistic” given the impact of the Iran war.
Castlelake said on Friday it was in the early stages of considering a possible bid for easyJet, but no approach has been made to its board and there can be no certainty an offer will be made. It has until June 26 to make a firm bid or walk away.
EasyJet responded on Monday by saying it has not held talks with Castlelake but it would assess any potential offer if one was made, noting its stock price was “temporarily depressed” by the war’s impact on jet fuel prices and customer confidence.
“The Board remains highly confident in easyJet’s strategy and its ability to deliver attractive long-term value for shareholders,” it said in a statement.
Shares in easyJet rose by as much as 13 per cent to 449.9 pence by 0851 GMT, valuing it at about £3.41 billion ($4.59 billion). As of Friday, its stock had fallen over 22 per cent so far this year.
HURDLES TO A FULL TAKEOVER
While analysts said Castlelake had the financial firepower to bid for easyJet, they considered a full takeover unlikely because of European and British regulatory restrictions.
Easyjet warned last month that its full-year forecast remained uncertain as the Iran conflict drove up fuel costs, while summer bookings were behind last year.
Castlelake said separately on Monday it held a 2.14 per cent stake in easyJet, making it a top 10 shareholder, LSEG data shows.
The investment firm, majority owned by Brookfield Asset Management BAM.N, has aviation sector experience, largely as a lender and aircraft lessor, and has been expanding its presence through a platform backed by billions in capital to finance airlines and aircraft assets.
SHARE PRICE CONSISTENTLY UNDERVALUED
Barclays analyst Andrew Lobbenberg said easyJet’s share price consistently undervalues its assets.
EasyJet has struggled to recover its valuation since the COVID-19 pandemic, but has managed to boost its results thanks to a successful holiday business and an efficient Airbus fleet.
There has been speculation of a takeover bid for easyJet for years as it has faced a tough challenge from rival Ryanair RYA.I. Its slots at Gatwick airport as well as in key hubs in Paris and Geneva make it a potentially interesting takeover candidate for larger players looking to expand their footprint.
But investors have for years pointed to the possible competition challenges that could arise if Europe’s major airline groups were to take over easyJet, particularly British Airways-owner IAG ICAG.L or Air France-KLM AIRF.PA.
Lobbenberg said any deal would “need to have regard” for ownership and control rules. He said it would also need to take into account the relationship with easyJet founder Stelios Haji-Ioannou “whose concert party owns 15 per cent of the company and collects a 0.25 per cent of revenue royalty fee for the brand which it owns.”
(Reporting by Ankita Bora and Yadarisa Shabong in Bengaluru and Joanna Plucińska; Editing by Mrigank Dhaniwala and Alexander Smith)
