EasyJet slams £4.7bn takeover approach as attempt to buy it ‘on the cheap’

Dan Coatsworth, head of markets at AJ Bell, said: “EasyJet’s board doesn’t believe the company should fly away with Castlelake. It has rejected three offers, signalling the bidder is nowhere near the right price to get a deal over the line.

“Castlelake has gone public with the bid details to try and win over investors and get them to encourage the board to reconsider the proposal.

“The third bid of 625p cash per share is a 59 per cent premium to the price on the eve of Castlelake’s bid interest first becoming public. Given this was an opportunistic bid at a point when EasyJet’s shares were dragged down by the Middle East conflict, comparing the bid to just before the Iran war kicked off gives a better idea of whether Castlelake’s bid is generous or not. It equates to a 35 per cent bid premium which is less than the 43 per cent average seen on UK-listed takeovers this year, according to AJ Bell research.

“Reports suggest holiday demand has soared in recent weeks on the prospect of the Middle East conflict coming to an end. EasyJet shareholders may feel the company can quickly bounce back from the recent turbulence, and there is no need to sell out to Castlelake. After all, EasyJet was in a good place earlier this year and strategically it continues to make solid progress, including a fast-growing packaged holidays operation.

“The big unknown since Castlelake first moved on EasyJet was how the bidder would get around the EU ownership rules. Regulations require all airlines with EU operating licences to be majority owned and controlled by EU nationals. Castlelake has found a solution in the form of two aviation executives – Peter Bellew and Mark Breen – becoming co-investors.

“The market doesn’t believe Castlelake will succeed, given how the shares at 522p trade significantly below the latest bid. EasyJet’s biggest shareholders are the Haji-Ioannou family and a host of asset managers, all of whom are likely to have their eye on the long-term prize. Castlelake may have to dig a lot deeper to win them over.”