The board of low-cost airline easyJet (LON:EZJ) said it had agreed in principle a £5.5 billion bid from Castelake. The proposal values easyJet shares at 690p against the US investment firm’s previous offer of 650p and Friday’s close of 558p.
Fifth time lucky?
Castlelake’s fifth proposal includes a partial unlisted share alternative to cash and relies on ‘satisfactory’ due diligence. The US investment firm has also agreed to a ‘best endeavours’ commitment to obtain regulatory clearance and approval.
easyJet shares gained 10% to 615p, short of the 690p offer due to caution over the control and ownership question. EU rules prevent non-EU citizens or companies from owning or controlling EU airlines.
Castlelake has previously proposed partnering with Irish nationals Peter Bellew and Mark Breen. The pair, who have extensive experience with airlines, would own a controlling shareholding in easyJet through an EU company.
The two sides have agreed to extend the PUSU (put up or shut up) dealine to 3 August. Meanwhile, whether easyJet founder and major shareholder Stelios Haji-Ioannou has backed the proposal is still unclear.
Today’s muted share price reaction suggests there is still some way to go for Castlelake to consumate this deal. Analysts, including the team at US bank JP Morgan, continue to point to the thorny question of ownership and control.
Others have suggested a rival EU carrier could enter the bidding with a view to breaking up the business. That would solve the issue of control, and divvying up easyJet’s 1,200 routes and lucrative airport slots could make financial sense.
Having journeyed this far, we would suggest easyJet shareholders remain seated until 3 August and see how the saga unfolds. As it stands, Castlelake is clearly keen, having made five offers, the board is onside, and 690p represents a decent premium.
Read the press release here:
https://corporate.easyjet.com/home/default.aspx
