easyJet Takeover Saga Continues as Bid Deadline Nears

DALLAS — In a follow-up to yesterday’s story, Reuters is saying that US private equity firm Castlelake has taken its £4.7 billion (US$6.3 billion) takeover proposal for easyJet (U2) directly to shareholders. The easyJet board rejected three bids from the firm. But major investors are demanding at least £7 per share (US$9.25), about £600 million (US$792 million) more, to engage, claiming U2 is undervalued.

Castlelake said it was taking the proposal to shareholders because of the airline board’s “unwillingness to engage meaningfully”.

Background

US private equity firm Castlelake (which already holds a 2.14% stake) is attempting to take the airline private. They have partnered with two former easyJet executives to propose a plan that will use an EU-based holding company to satisfy regulatory requirements. EasyJet's board dismissed the latest 625p/share bid as "highly opportunistic" and a bid to buy the company "on the cheap."

Shares have not traded above £7 since 2021. They fell from £12 early in the pandemic and have never returned to that level.

Backlog

In December 2023, easyJet finalized a firm order for 157 additional Airbus A320neo Family aircraft: 56 A320neos and 101 A321neos. Delivery is scheduled for between FY29 and FY34. The airline also has an additional 100 purchase rights. In addition, easyJet has a pre-existing backlog of 158 aircraft. Thus, the combined active backlog exceeds 300 aircraft.

Shareholders

According to reports on Cityam.com, major shareholders have indicated they want an offer closer to £7 per share. They believe that easyJet's long-term earnings potential, resilient network, and fast-growing packaged holiday business justify a significantly higher premium.

Who are the major shareholders? First is the Haji-Ioannou family, historically the largest shareholder group, which holds about 15% of the shares. Founder Sir Stelios Haji-Ioannou holds roughly 9.52%, while his siblings hold the rest. Obviously, they have a great deal of say in whether this deal goes through.

“I think they’ll engage if the price is at seven plus. If you look at the book value of the fleet, the holiday business, the price should be nearer seven than six,” one large investor told the Financial Times.

Easyjet’s board is “probably thinking about in theory what their valuation could be in two to three years. I’m sure they could do some maths and get quite a lot higher than 625p,” another shareholder said.

But Cityam.com quotes another investor as saying that they were “surprised” that the airline has not yet engaged with Castlelake, adding, “My sense is that your job is to engage in these sorts of areas.”