EasyJet signalled willingness to entertain a higher offer from Castlelake by granting the US investment firm more time and some access to its books in order to sweeten its latest bid, which values the UK discount carrier at about £4.93 billion (€5.7 billion)
The airline sought an offer extension to July 5, giving Castlelake another nine days to weigh its options. Castlelake’s bidding group includes Brookfield Asset Management as well as European Union nationals, among them Irish airline executives Peter Bellew and Mark Breen, that would hold a majority to overcome ownership restrictions.
EasyJet said the improved bid of £6.50 a share still falls short, while the extra time and more access to limited commercial information “might produce a more attractive proposal that better reflects” the carrier’s value, according to a statement on Thursday.
Castlelake’s latest overture compares with a previous bid of £6.25 a share. EasyJet’s shares have consistently traded well below that range, suggesting investors are doubtful a bid will materialise at that level. On Thursday, the stock jumped as much as 5.9 per cent to 571.4 pence.
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“We see it as unlikely that the EasyJet board will seriously consider offers below 700p, especially given various unknowns on deliverability and satisfying various conditions,” JPMorgan analysts including Harry Gowers wrote in a note.
Castlelake said it welcomed the constructive engagement and deadline extension, and that it would make a further announcement “as and when appropriate.”
The obstacles mainly sit around the gap between the latest offer and the board’s own view of the airline’s potential value, the analysts said. There’s also the issue of limited engagement between the two parties, as well as founder Stelios Haji-Ioannou’s position, and questioned over the proposed ownership structure, they said.
But the change in tone from the board shows that opposition from EasyJet might be waning. The two sides have sparred over the potential deal in the past month. The investment firm said EasyJet’s board has shown “unwillingness to engage meaningfully,” taking its offer directly to shareholders. The UK airline has called the overtures “highly opportunistic” and said the investment firm was trying to buy the carrier “on the cheap.”
EasyJet reiterated on Thursday that it finds itself in “a position of strength, and the company said that it’s concerned about the ownership structure and “deliverability” of any offer from Castlelake.
As a US entity, Castlelake cannot take majority control of a European aviation asset, requiring the need of a partner. The US company said in its last offer that it teamed up with Breen and Bellew, who was an executive at EasyJet before his acrimonious departure at the start of the decade.
To a possible suitor, EasyJet offers attractive landing slots in places like Milan, Geneva and Luton near London, and the company operates a fleet of modern Airbus aircraft that are the most popular type of commercial airliner.
The single-biggest shareholder of EasyJet is the family of its founder, Stelios Haji-Ioannou, that holds a 15.3 per cent stake. About 70 per cent of the shares are held by investment firms, according to data compiled by Bloomberg. – Bloomberg
