EasyJet has described a potential £3 billion takeover bid from the US investment group Castlelake as "highly opportunistic," as the airline's shares surged to their highest level in three months following news of the acquisition interest.
Castlelake's Offer
The US private credit firm Castlelake announced on Friday that it was considering a takeover offer for the airline. On Monday, it confirmed it had already acquired a 2.14% stake in the business, valuing easyJet at a minimum of 403 pence per share, or approximately £3 billion overall.
However, easyJet strongly criticized the potential buyer, stating that the timing was "highly opportunistic" given that the airline's share price was "temporarily depressed due to the current situation in the Middle East and its impact on customer confidence and jet fuel prices."
Market Reaction
Before news of the takeover interest emerged, easyJet shares had lost about a fifth of their value since the start of the year. However, shares shot up by as much as 12% in early trading on Monday, reaching 444.7 pence—well above the minimum offer level and their highest since March 2, valuing the company at approximately £3.4 billion. The gains later moderated, with shares up about 10%.
EasyJet's board expressed confidence in the company's strategy, citing its cash position and profit outlook.
Regulatory Hurdles
Under City takeover rules, Castlelake, which is headquartered in Minneapolis and manages $36 billion (£27 billion) in assets, has until 5 p.m. on June 26 to announce whether it intends to make a formal offer.
EasyJet said it would "consider any proposal, should one be made," but warned of "considerable regulatory, financial, and other execution challenges associated with a potential takeover." Under EU rules, European airlines must be majority-owned by investors within the region. Ruairi Cullinane, an analyst at RBC Capital Markets, noted that these rules "could, at the very least, complicate a takeover of easyJet by Castlelake, if acting alone."
Previous Interest
This is not the first time the FTSE 100 airline has attracted potential buyers. In October, reports emerged that Swiss-based shipping company MSC was considering a takeover. In 2021, easyJet rejected an approach from rival airline Wizz Air.
Company Background
EasyJet, headquartered in Luton and employing over 16,000 people globally, is one of Europe's three largest low-cost airlines, behind Ryanair, with Wizz Air in third place. The airline was founded by billionaire Stelios Haji-Ioannou, who remains the largest single shareholder with a stake of about 15%. He declined to comment on Monday.
Castlelake already has a strong presence in the airline industry, having provided loans to Scandinavian airline SAS and Virgin Atlantic Airways.
Market Implications
Susannah Streeter, chief investment strategist at Wealth Club, said: "Castlelake clearly believes the market may be underestimating easyJet's longer-term earnings potential and the resilience of its network."
A takeover of easyJet would mark another significant loss for London's struggling stock market, which has seen a series of high-profile exits in recent years, including Ashtead, Flutter Entertainment, and CRH. 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."
