Low-cost carrier easyJet has rejected a £4.7 billion ($6.2 billion) takeover bid by US investment firm Castlelake, with this latest offer being the third proposed by the company. The orange airline called the bid ‘opportunistic’ and argued that even the revised offer, which represented an increase of £0.25 per share price (£0.33), still undervalued it and its assets. Now, Castlelake has to consider its next steps.
Indeed, The Guardian reports that the firm faces a Friday deadline for its takeover attempt, by which time, as noted by the BBC, it will have to either walk away from the negotiating table altogether or make a firm offer for easyJet. This isn’t the only time that Castlelake has expressed its interest in acquiring a low-cost carrier, with the firm having also expressed interest in now-defunct Spirit Airlines this year.
Castlelake’s Highest Offer Yet Still Isn’t Enough
Castlelake went public this morning to confirm that what was its third offer to acquire easyJet had been rejected. Valued at £6.25 ($8.27) per share, the £4.7 billion deal represented a 4.17% increase compared to its previous offer at £6 per share ($7.94). This second offer, in itself, had represented a 7.14% increase on Castlelake’s very first offer, which had valued the airline at £5.60 per share ($7.41).
According to The Guardian, Castlelake publicized the details of the offer in order for easyJet shareholders to be able to evaluate its merits. However, the airline’s board confirmed this morning that it had unanimously rejected the deal “as not being in the best interests of shareholders” yesterday. easyJet went on to call the offer “an opportunistic attempt to acquire easyJet ‘on the cheap,'” and added that:
“The third proposal (…) is highly opportunistic, delivered against the backdrop of easyJet’s temporarily depressed share price, and still fundamentally undervalues easyJet and its prospects.”
Details of Castlelake’s interest in easyJet first arose earlier this month. Regular readers of Simple Flying will already be familiar with the US investment firm after its interest in acquiring US ultra-low-cost carrier Spirit Airlines became known earlier this year. However, even at the time, there was some skepticism as to whether Castlelake would save Spirit or just asset strip it: in any case, Spirit collapsed in May.
As noted by Simple Flying’s reporting at the time earlier in June, Castlelake’s failure to secure a transaction with Spirit Airlines fueled its fire to invest in the low-cost airline sector, particularly with aviation valuations facing external pressure. As a result, it turned its attention to easyJet, which looked ripe for external acquisition, having reported a first-half pre-tax loss of $745 million for the six months to March.
However, easyJet has stood strong in the face of Castlelake’s takeover offers. This is because, as the airline puts it, while Castlelake has been steadily increasing its valuation of easyJet, the firm’s figures are “based primarily on Middle East conflict-affected share prices, short-term earnings, and analyst reports.” These, easyJet argues, are not reflective of the airline’s prospects in the medium and long-term.
easyJet’s 13-route winter expansion highlights Newcastle’s rapid growth and renewed investor attention.
easyJet has long been one of the largest low-cost carriers in Europe, with its main rivals being Ireland’s Ryanair and Hungary’s Wizz Air. This June, current scheduling data made available by Cirium, an aviation analytics company, shows that easyJet is scheduled to operate a grand total of 56,134 flights. These are split between 27,686 at easyJet itself, 23,890 at easyJet Europe, and 4,558 at easyJet Switzerland.
Fleet-wise, the carrier was an all-Boeing airline to begin with, favoring the 737 family, but gradually transitioned to an all-Airbus operator favoring narrowbody twinjets from the A320ceo and (eventually) A320neo series after the turn of the century. Current fleet data from Planespotters.net shows that it now has 366 jets at its disposal: 191 at easyJet, 133 at easyJet Europe, and 31 at easyJet Switzerland.
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