Airline rejects fourth Castlelake proposal
EasyJet has rejected another takeover approach from Castlelake, but the British low-cost airline has also agreed to begin limited discussions with the US investment firm.
The latest proposal valued easyJet at £4.9 billion and offered 650p per share. The board unanimously turned it down, arguing that the bid still “substantially” undervalued the airline and raised serious doubts about whether a transaction could actually be completed.
Limited access could lead to a higher offer
Despite rejecting the offer, easyJet signalled a more open position on Thursday by saying Castlelake would be granted access to selected commercial information.
The board said this limited review “might produce a more attractive proposal” that better reflects easyJet’s value, future prospects and shareholder interests.
EasyJet also warned that important concerns remain unresolved. “The board continues to be concerned about the ownership structure and deliverability of any offer from Castlelake, and the time it will take,” the company said.
Deadline pushed back to 5 July
Castlelake now has until 5pm on 5 July to either improve its bid or withdraw. The deadline had previously been set for 26 June.
The Minneapolis-based firm welcomed easyJet’s “constructive engagement and the nine-day extension to the ‘put-up or shut-up’ deadline”.
Investors interpreted the extension as a sign that the talks could still lead to a revised proposal. EasyJet shares rose 6% on Thursday afternoon to 573p.
Offer has climbed sharply since 1 June
Castlelake’s fourth approach, at 650p per share, was above its earlier 625p proposal, which easyJet had described as “highly opportunistic”.
The first offer was made on 1 June at 403p per share, showing how much the potential bid has increased during the negotiations.
Castlelake, which manages $38 billion, equivalent to about £28 billion, is active in aircraft leasing and aviation finance. It already owns a small stake in easyJet.
EU ownership rules shape the deal structure
A key issue is easyJet’s European operating licence. To keep that licence, European airlines must remain majority owned and controlled by EU investors.
Castlelake has added Brookfield Asset Management, based in New York, to the bidding vehicle. The structure also includes two Irish aviation executives, Peter Bellew and Mark Breen.
Bellew previously served as chief executive of Malaysia Airlines and held senior operating roles at easyJet, Riyadh Air and Ryanair. Breen is chief executive of Dublin-based Oneiros Aerospace and was formerly chief operating officer at Oman Air.
Irish executives would hold majority control
Under the structure previously proposed, Castlelake and co-investors including Brookfield would own 49% of the bidding vehicle.
The remaining 51% would be held by Bellew and Breen, both EU nationals, in an effort to satisfy European ownership and control requirements.
Bellew also runs Dooks Capital, a seed investment and advisory firm focused on artificial intelligence in aviation. He founded the firm last September, and it operates out of Saudi Arabia.
Market sees room for a sweetened bid
Chris Beauchamp, chief market analyst at IG, said the board’s stance still appears firm, but the extended deadline has encouraged investors to believe that a transaction remains possible.
He said the market seems to be pricing in the chance of a higher offer, which helps explain the recent strength in easyJet’s shares.
Castlelake has said it hopes to improve its proposal after reviewing easyJet’s financial and commercial information. For now, the airline has rejected the price on the table, but the opening of its books keeps the takeover contest alive.
