easyJet rejects third takeover bid from Castlelake as undervaluing airline

easyJet has turned back a third takeover approach from Castlelake, setting up a valuation fight that cuts to the heart of post-pandemic airline economics. The FTSE 250 carrier said the latest bid, worth about £4.74 billion and priced at 625p a share, was too low for a business whose shares have been buffeted by higher jet-fuel costs and conflict risk in the Middle East.

Castlelake made its first proposal at 560p a share on June 12, followed by 600p on June 17 and then 625p on June 20. easyJet rejected the third offer on June 21 and made its stance public on June 22, while the Takeover Panel’s put-up-or-shut-up deadline was set for 5pm on June 26. The US investor said it was taking the offer directly to shareholders after the board refused to engage meaningfully.

easyJet’s response was blunt. The airline described the approach as a “highly opportunistic” attempt to buy the company on the cheap and said the proposal “fundamentally undervalues easyJet and its prospects.” It also objected to the ownership structure Castlelake outlined, saying the bidding vehicle would be 49% owned by Castlelake and 51% by EU nationals, with potentially other undisclosed investors. That structure matters because EU airline rules require carriers to be majority owned and controlled by EU nationals.

The timing is central to Castlelake’s argument. It said the 625p proposal represented about a 59% premium to easyJet’s closing price of 394.20p on May 28, the last trading day before its interest became public, and said the bid was partially equity-backed so shareholders could remain invested in a privately held version of the airline. Castlelake also argued the deal would “substantially de-risk” easyJet’s business plan and said the company could still reach its medium-term target of more than £1 billion in pre-tax profit. It already holds about 2.14% of easyJet, or roughly 16.2 million shares.

The pressure point for easyJet is not just ownership, but the economics of flying. Shares rose 3.4% to 521.22p on June 22, valuing the airline at about £3.95 billion, after the company said its stock had been temporarily depressed by Middle East tensions and higher fuel costs. easyJet warned it could face a £175 million hit if oil prices stay elevated. Castlelake, which manages about $36 billion to $38 billion and has invested more than $24 billion in aviation since 2005, has teamed with former easyJet chief operating officer and former Malaysia Airlines chief executive Peter Bellew, and with Mark Breen of Oneiros Aerospace and former Saudi budget carrier flyadeal, to satisfy the EU ownership test. For passengers, the more immediate question is not who owns easyJet, but whether persistent fuel shocks and takeover pressure will force the airline to defend fares, capacity and service with even tighter discipline.