The U.S. investment firm Castlelake has shared more details about its plan to fully acquire the British low-cost airline EasyJet, as it revealed on Monday that it has created a £4.74 billion (US $6.3 billion) package to buy the publicly traded carrier at £6.25 per share.
The Minneapolis-based ‘alternative investment firm’ first signalled its interest in EasyJet at the end of May, saying at the time that it was exploring a potential deal to take the airline private, although cautioning that it had not yet approached EasyJet’s board of directors.
Since then, Castlelake has submitted three non-binding deals to EasyJet’s board and, on each occasion, the board of directors has rejected Castlelake’s advances. Castlelake hopes that by going public with details of the proposal it submitted to the EasyJet board, shareholders will exert pressure on the airline to begin formal negotiations.
- On June 12, Castlelake initially proposed an offer to buy EasyJet’s 758 million shares at a price of £5.60 per share. The proposal was rejected days later on June 16.
- Castlelake returned just a day later to propose an offer price of £6.00 per share. EasyJet’s board rejected this proposal on June 20.
- Within hours, Castlelake said it would increase its offer price to £6.25 per share. The board rejected the deal on Sunday.
“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,” the investment firm said in a statement on Monday.
Castlelake has until June 26 to announce a formal bid to acquire EasyJet under so-called ‘Put up, or shut up,’ rules.
The firm is hoping to convince shareholders that its offer will give the best returns, with the £6.25 per share offer price representing a 59% premium on EasyJet’s share price at the close of business on May 28 (which is the last date that EasyJet’s share prices weren’t potentially affected by the takeover bid – otherwise known as the ‘undisturbed date.)
What’s more, the offer price represents a 71% premium on EasyJet’s average share price since April 16, following the conflict in the Middle East, and a 35% premium on EasyJet’s shares on February 27, which was the day before the U.S. and Israel launched a joint military campaign against Iran.
Under EU antitrust rules, Castlelake cannot take full control of EasyJet and must, instead, find a local European partner to take a controlling stake in the airline. There had been rumors that Castlelake might seek a partnership with a European airline group, including the likes of Air France-KLM, but the firm has chosen an alternative route.
Castlelake has partnered with two aviation executives from Europe who would control an EU-based company that would assume a controlling stake in EasyJet. One of those executives is Irish citizen Peter Bellew, who was once the chief executive of Malaysian Airlines.
Bellew left Malaysian Airlines in 2017 and became the chief operations officer at EasyJet’s biggest rival, Ryanair. Bellew only lasted at Ryanair a couple of years, at which point it was announced that he intended to take on the same role at EasyJet.
What ensued was a major legal battle as Ryanair attempted to block Bellew’s move to EasyJet, arguing that he had signed a non-compete clause in his employment contract. Ultimately, Ryanair lost the court case, and Bellew moved to EasyJet.
Again, Bellew only lasted a couple of years before his sudden departure. His tenure had been marked by cabin crew and pilot unions accusing him of “misleading” investors and staff in efforts to reduce employee costs.
Castlelake’s interest in EasyJet is in its assets, such as multi-million-dollar Airbus A320 airplanes and jet engines. Given the effect that rising jet fuel prices have had on EasyJet’s share price, the airline’s assets are currently worth more than the total valuation of the company.
EasyJet’s board has slammed Castlelake’s timing as “highly opportunistic,” but the investment firm says that its bid “compares favorably” to EasyJet’s aspirational financial targets over the next decade.
