EasyJet steps up its operations in London following an agreement in principle with Castlelake on the merger
Castlelake has pledged to support the growth strategy and the fleet modernisation programme. Analysts, however, seem unconvinced
(Il Sole 24 Ore Radiocor) - EasyJet takes off on the London Stock Exchange, following an agreement in principle with Castlelake, the US investment firm that has made inroads into the low-cost carrier with its fifth takeover bid, raising the total to 5.5 billion pounds. EasyJet shares rose by more than ten points, the biggest gain on the Stoxx Europe 600 index, though they remained below the proposed price. EasyJet announced on Sunday that its board had agreed with Castlelake on the key terms of an indicative takeover bid of 6.90 pounds per share in cash, with a partial alternative option in unlisted shares.
The price represents a 24 per cent premium on EasyJet’s closing price on Friday. Castlelake has been expressing interest in the low-cost airline since early June, raising its bids week after week, from an initial £5.60, then to £6, £6.25 and £6.50 – all of which were rejected – up to £6.90, at which point an agreement was reached. Since the initial bid, the share price has risen by around 40%, whilst the increase since the start of the year stands at around 21%.
The British airline has stated that the financial terms of the US investment firm’s bid are such that its directors can recommend it to shareholders. In its fifth and final indicative offer, Castlelake has undertaken to “do its utmost” to secure the necessary approvals for the transaction and has committed to supporting the airline’s growth strategy and fleet modernisation programme.
Analysts, however, appear unconvinced. Experts at JPMorgan have expressed concerns about how Castlelake and EasyJet’s board of directors will manage to meet the ownership requirements set by the EU. Castlelake had previously indicated that it would hold 49 per cent of the special purpose acquisition vehicle, whilst the remaining stake would be held by two EU citizens: Peter Bellew, former CEO of Malaysia Airlines and former COO of EasyJet, and Mark Breen, an industry executive. EU regulations require that airlines operating within the Union be majority-owned and controlled by EU citizens.
Analysts at JPMorgan also noted that, although the price of the accepted bid is close to investors’ expectations, shareholder approval is not guaranteed, as the possibility of a counter-offer remains open. Despite the commitments made by Castlelake, Bernstein believes that the US firm’s experience in the aircraft leasing sector suggests a break-up of EasyJet, characterised by the separation of its most valuable assets.
