EasyJet has rejected a £4.74 billion takeover approach from US investment fund Castlelake, branding the third proposal as a highly opportunistic attempt to buy the airline 'on the cheap'. The budget airline's board determined that the offer, worth 625p per share, fundamentally undervalues the company and is not in the best interests of its shareholders.
Details of the Third Proposal
Castlelake went public on Monday with details of its third takeover proposal after its advances were rejected. The offer, made on June 20, represented an increase from previous proposals of 560p and 600p per share. Despite this, EasyJet's board, advised by its financial advisers, concluded that the bid was opportunistic, delivered against the backdrop of a temporarily depressed share price. The airline stated: '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 board further added that the proposal 'represents an opportunistic attempt to acquire easyJet 'on the cheap' and that it is therefore not in the best interests of easyJet shareholders.'
Share Price Reaction and Market Context
Following the public disclosure, EasyJet shares rose by 3% to 518.5p in mid-morning trading. Castlelake, which owns a stake of approximately 2.14% in EasyJet through shares held on behalf of funds it manages, insisted that its latest offer provided compelling value. The fund highlighted a premium of about 59% on the 394.20p closing price on May 28, the day before its interest became public. However, EasyJet noted that its share price had been pushed lower by concerns over the impact of the Iran war on the airline sector. The FTSE 250 firm's shares had fallen around 30% in the past year prior to the bid interest.
Castlelake's Strategy and Criticism
Castlelake criticised EasyJet's board for refusing to engage 'meaningfully' and announced the third proposal to enable shareholders to consider its merits. The 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.' This comes ahead of the 'Put-up or Shut-up' deadline set by the takeover panel at 5pm on June 26. Castlelake argued that its possible offer would substantially de-risk the execution of the company's business plan and offer current investors a partial equity alternative to remain invested in a privately held EasyJet.
Ownership Structure Concerns
EasyJet also criticised the proposed ownership structure as 'opaque', claiming it would be 49% owned by Castlelake and 51% owned by 'EU nationals and potentially other investors which have not been disclosed'. Castlelake countered that it had teamed up with EU national individual investors Peter Bellew and Mark Breen, describing them as experienced executives with senior positions in airlines, including European low-cost carriers. EasyJet highlighted its strong financial position and reiterated its focus on a medium-term target of delivering over £1 billion in pre-tax profits.
Castlelake's Background
Led by executive chairman and founder Rory O'Neill, Castlelake has assets under management worth $36 billion (£27.3 billion). The fund entered talks in January with bankrupt US carrier Spirit Airlines over a possible takeover and previously bailed out collapsed Scandinavian Airlines (SAS) before selling its shares to Air France-KLM.
