EasyJet has rejected a £4.74 billion takeover approach from US investment fund Castlelake, branding the offer as an attempt to buy the airline 'on the cheap'. The budget airline said Castlelake's latest proposal, worth 625p per share, remained 'highly opportunistic' and not in the best interests of shareholders.
Third Proposal Rejected
Castlelake went public on Monday with details of its third takeover proposal for EasyJet after its advances were rejected. The third approach, made on June 20 for 625p a share, was declined the following day. This followed previous proposals worth 560p and 600p per share. Shares in EasyJet rose three per cent to 518.5p in mid-morning trading following the news.
EasyJet criticised the proposed bid, stating: 'The board of easyJet carefully considered the third proposal with its advisers and concluded that it is highly opportunistic, delivered against the backdrop of easyJet's temporarily depressed share price, and still fundamentally undervalues easyJet and its prospects.' The airline added: 'The board believes that the third proposal represents an opportunistic attempt to acquire easyJet “on the cheap” and that it is therefore not in the best interests of easyJet shareholders.'
Castlelake's Stance
Castlelake, which owns a stake of around 2.14 per cent in EasyJet through shares held on behalf of funds it manages, said it was taking its third proposed offer directly to EasyJet shareholders after claiming the carrier refused to engage 'meaningfully'. The US investment fund said: 'Following the rejection of three proposals by the easyJet board, and given its unwillingness to engage meaningfully, Castlelake is announcing this third proposal to enable easyJet shareholders to consider its merits and provide their views on the third proposal to the easyJet board.'
The announcement comes ahead of the so-called 'Put-up or Shut-up' deadline set by the takeover panel at 5pm on June 26. Castlelake insisted its latest possible bid offered 'compelling value', at a premium of around 59 per cent on the 394.20p price of EasyJet shares at market close on May 28, the day before its interest became public.
EasyJet's Response
EasyJet said the takeover interest comes at a time when its share price has been pushed lower by worries over the impact of the Iran war on the airline sector. The FTSE 250 firm's shares were down around 30 per cent in the past year before news of the bid interest. The airline highlighted its strong financial position and said it remained focused on its medium-term target to deliver more than £1 billion in pre-tax profits.
EasyJet also criticised the proposed ownership structure as being 'opaque', claiming it would be 49 per cent owned by Castlelake and 51 per cent owned by 'EU nationals and potentially other investors which have not been disclosed'. Castlelake said it had teamed up with EU national individual investors Peter Bellew and Mark Breen, describing them as 'experienced executives who have successfully held senior positions in airlines, including European low-cost carriers'.
Castlelake's Background
Led by executive chairman and founder Rory O'Neill, Castlelake has assets under management worth 36 billion US dollars (£27.3 billion). The firm entered talks in January with bankrupt US carrier Spirit Airlines over a possible takeover and has previously bailed out collapsed Scandinavian Airlines (SAS), later selling its shares to Air France-KLM.
