US private credit group Castlelake says it is considering an approach for low-cost carrier
EasyJet said a takeover bid from Castlelake would be ‘highly opportunistic’ as the prospect of an approach from the US private credit group sent shares in the low-cost carrier up 12 per cent on Monday.
Castlelake said on Friday that it was considering a bid for easyJet, but had not yet approached the airline’s board. In a statement on Monday, easyJet called the potential offer “highly opportunistic” and said no discussions had been held with Castlelake.
On Monday, the US group disclosed that it had already acquired 2.14 per cent of easyJet’s shares.
In its statement, easyJet said: “The board notes the highly opportunistic timing when easyJet’s share price is temporarily depressed due to the current situation in the Middle East and its impact on customer confidence and jet fuel prices.”
EasyJet has tapped UK banking veterans Simon Robey and Simon Warshaw from Evercore to advise on a defence strategy alongside its corporate brokers BNP Paribas and Panmure Liberum, according to people familiar with the matter.
The rise in the airline’s shares on Monday pared declines of more than 20 per cent since the start of the year, valuing it at £3.4bn.
Disclosed short positions in easyJet are equivalent to 5.5 per cent of its outstanding shares, meaning investors had been betting on further declines. This is the second-highest level among European airlines, after Hungarian low-cost carrier Wizz Air.
EasyJet said it would “consider any proposal, should one be made”, but added there were “considerable regulatory, financial and other execution challenges associated with a potential takeover”. Castlelake has until June 26 to submit an offer under UK takeover rules.
EU rules — which still apply to the UK — require European airlines to be majority owned by shareholders from within the region.
RBC Capital Markets analyst Ruairi Cullinane said the rules “could, at the very least, complicate a takeover of easyJet by Castlelake, if acting alone”.
However, Andrew Lobbenberg, airlines analyst at Barclays, said the rules were “not explicitly enforced”, adding that Ryanair’s EU ownership was less than 30 per cent.
In its response on Monday, easyJet stressed it was “in a position of strength, underpinned by an investment-grade balance sheet with a net cash position, alongside strong customer satisfaction and high employee engagement”.
The company has been forced to downgrade profit expectations this year after being hit by soaring fuel prices and delayed bookings caused by the Iran war.
But it added: “The board remains highly confident in easyJet’s strategy and its ability to deliver attractive long-term value for shareholders. The company remains focused on executing its medium-term target of delivering greater than £1bn profit before tax.”
Source: www.ft.com
Aleksei Andrievskii is the founder of the ANDRIEVSKII SEA WEALTH family office in Cyprus, a member of the advisory board at Bendura Bank AG, Liechtenstein