The £4.7 billion takeover bid for easyJet by US investment firm Castlelake has hit a significant roadblock, with its latest offer of 625 pence per share failing to sway key shareholders. The airline's board has rejected the proposal for the third time, prompting Castlelake to publish its proposed terms in an effort to build momentum and garner support ahead of a looming bid deadline.
Despite the public disclosure, easyJet's share price has shown only a modest increase, suggesting that investors remain unconvinced by Castlelake's offer. Analysts point out that 625 pence is not significantly higher than easyJet's pre-pandemic share price and may be seen as undervaluing the company's strong balance sheet and long-term growth prospects.
The proposed ownership structure designed to comply with EU regulations has also raised concerns, with easyJet's board questioning its 'deliverability'. Castlelake plans to create an 'EU partner' company led by EU nationals, which would hold a majority of voting rights, while the bulk of economic ownership would reside with Castlelake and its co-investors. This structure is seen as opaque by some analysts, who believe it may not meet the spirit of the EU rules.
The absence of public support from easyJet's founder and significant shareholder, Stelios Haji-Ioannou, has also been noted. His family holds a 15% stake in the airline and his silence on the proposed takeover is seen as undermining Castlelake's chances of winning over other shareholders.
Castlelake's commitment to supporting easyJet as a 'stronger, more resilient European airline' may not be enough to address the fundamental issues of price and shareholder consensus. As the bid deadline approaches, it remains to be seen whether Castlelake can convince key investors to back its offer and secure a deal.
Source: Nils Pratley