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EasyJet Notes 'Highly Opportunistic Timing' as Castlelake Discloses Takeover Interest; Shares Soar

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EasyJet Notes 'Highly Opportunistic Timing' as Castlelake Discloses Takeover Interest; Shares Soar

EasyJet (EZJ.L) signaled that its board will gauge a takeover offer from US-based Castlelake after the alternative investment firm disclosed that it is in the early stages of evaluating a potential bid for the British budget airline.

The company, which is yet to receive a buyout proposal from or hold any discussions with Castlelake, traded 10% higher in London early Monday.

While the low-cost carrier is open to examine any move that could maximize shareholder value, it noted the "highly opportunistic timing" of a potential bid, given its share price is temporarily depressed due to the war in the Middle East. The board also emphasized that any offer should be deliverable amid "considerable" regulatory, financial, and other execution challenges associated with a potential takeover.

"easyJet is 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 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 GBP1 billion profit before tax," easyJet said Monday.

RBC Capital Markets said European Union/UK ownership rules could make a potential takeover of easyJet by Castlelake difficult or worse. "It is too early to say if an acquired easyJet could impact the competitive backdrop in Europe. The grounds for optimism for competitors could be that some of easyJet's fleet may end up deployed elsewhere. We wouldn't expect an acquired easyJet to increase capacity, particularly given industry-wide constraints on aircraft availability," analysts wrote in a quick-take note.

Castlelake confirmed May 29 that it was eyeing easyJet on behalf of certain funds or affiliates for which it serves as investment manager, in response to media speculation. It holds a 2.14% stake in easyJet and would be required under takeover rules to offer at least 4.0323 pounds sterling per share. A firm bid must be placed by June 26 or Castlelake must walk away.

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