EasyJet's board has surrendered too easily to US bidder Castlelake, according to a financial commentator, despite the airline's strong assets and a credible path to improved profitability. The budget airline has agreed in principle to a £5.5bn takeover at 690p per share, after rejecting three earlier offers.
Board's Lack of Fight
The board, led by chair Sir Stephen Hester, rejected three non-starter offers from Castlelake, a US private investment firm, as "fundamental" undervaluations. The last of those was at 625p. A fourth offer at 650p was dismissed as "substantial" undervaluation. However, an agreement in principle was reached at 690p, with Castlelake given until 3 August to formalize the bid.
Critics argue that the board has given up without a proper fight. The airline improved pre-tax profits by 46% to £665m in the two years to September 2025, has a solid balance sheet, and a plan to hit £1bn-plus profitability. The Iran conflict may have delayed this target by a year, but the board previously stated the target was intact.
Valuation Concerns
While 690p appears attractive against 464p before the Iran conflict, the board's earlier stance branded the 625p offer as an attempt to grab the business "on the cheap." The bump to 690p, just 6% from 650p, is seen as timid. EasyJet's shares traded at 586p only 13 months ago, and achieving the £1bn profit target could push the share price beyond 700p.
EasyJet's assets include 208 aircraft owned outright, orders for new aircraft amid constrained supply, and valuable landing slots at Gatwick and other airports. City analysts estimate the company is worth 600p-650p based on asset value alone.
Future Outlook
The board's job is to form its own view, not just echo shareholder pressure. EasyJet has good assets and a credible path to get operational metrics closer to market-leading Ryanair. The capital expenditure demands are hefty in the next couple of years, but this is not a crisis-ridden business in need of rescue by US financiers with a greater appetite for borrowing.
Castlelake may succeed in the end, even if the current market price of around 600p reflects regulatory risks over EU ownership rules. However, it is not too late for Hester to aim higher on price grounds. "You only get to sell once: at least go out in style," the commentator concluded.
