EasyJet rejects Castlelake’s £4.7 billion takeover proposal

EasyJet has rejected a £4.7 billion takeover proposal from U.S. investment firm Castlelake, calling the approach “highly opportunistic” and an attempt to buy the budget airline “on the cheap.”

Castlelake went public on Monday with its latest all-cash offer of 625 pence a share, valuing easyJet at just over £4.7 billion. The firm said it had made three approaches this month, all rejected by the airline’s board. Its earlier proposals were 560 pence and 600 pence a share, while its first approach indicated an intention to offer at least 403 pence a share, valuing easyJet at £3 billion, The Guardian reported.

The latest offer represents a 24% premium to easyJet’s closing share price last Friday. Castlelake, which owns about 2.14% of easyJet through funds it manages, said it had made the details public so shareholders could assess the proposal before a takeover deadline on Friday.

“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,” Castlelake said. The firm said the offer “offers compelling value” to shareholders.

Under City takeover rules, the Minneapolis-based investment firm, which manages $36 billion (£27 billion) in assets, has until 5 p.m. on June 26 to say whether it intends to make a firm offer or walk away.

EasyJet said its board had reviewed the latest proposal with advisers and rejected it. “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,” the airline said.

The company added that Castlelake’s proposal was “delivered against the backdrop of easyJet’s temporarily depressed share price” and “still fundamentally undervalues easyJet and its prospects.” It said Castlelake’s premium, multiple and future share price analyses were based largely on “Middle East conflict-affected share prices, short-term earnings and analyst reports.”

Castlelake said its ambition was to support easyJet as “a stronger, more resilient European airline under European control,” while preserving the airline’s assets and network. European Union rules require easyJet to remain majority-owned by EU citizens, a requirement that continues to apply after Brexit.

To address those rules, Castlelake said it had partnered with two investors: Peter Bellew, a former chief operating officer at Riyadh Air, easyJet and Ryanair and former chief executive of Malaysia Airlines; and Mark Breen, chief executive of Dublin-based Oneiros Aerospace, whose previous experience includes Oman Air. Bellew runs Dooks Capital, a seed investment and advisory firm focused on AI in aviation, founded last September and based in Saudi Arabia.

Castlelake said the partners would invest through and control an EU company that would hold a controlling shareholding in the proposed structure. “This proposed structure is consistent with structures adopted by a number of other European airlines that are subject to the same EU ownership rules as the company,” the firm said, adding that it was confident the plan was “a clear, deliverable solution” to regulatory requirements.

EasyJet described the proposed ownership structure as “opaque.”

Before takeover interest emerged, easyJet shares had fallen about a fifth since the start of the year. The stock has risen 36% over the past month amid takeover speculation and gained 2% early Monday to 515 pence.

EasyJet, headquartered in Luton, England, employs more than 16,000 people worldwide and is one of Europe’s three largest low-cost airlines, behind Ryanair and ahead of Wizz Air. The airline rejected an approach from Wizz Air in 2021, and reports in October said Swiss-headquartered shipping company MSC was considering a takeover of the business.

Castlelake, led by executive chair and founder Rory O’Neill, previously bailed out collapsed Scandinavian Airlines and later sold its shares to Air France-KLM. It also entered talks in January with bankrupt U.S. carrier Spirit Airlines over a possible takeover, The Guardian reported.