EasyJet has dismissed a £4.74 billion takeover approach from US investment firm Castlelake as an “opportunistic” attempt to buy the budget airline “on the cheap”, after rejecting three separate proposals. The carrier’s board said the latest offer, worth 625p a share, fundamentally undervalues the company and is not in the best interests of shareholders.
EasyJet board dismisses Castlelake’s third proposal
Castlelake put forward its third approach on June 20, increasing its offer from earlier bids of 560p and 600p a share. The easyJet board rejected the proposal the following day, June 21, after consulting with its advisers. The airline criticised the bid as “highly opportunistic”, arguing it was made against the backdrop of a temporarily depressed share price and still failed to reflect easyJet’s true worth.
The US fund, which holds a stake of around 2.14% in easyJet through shares held on behalf of funds it manages, went public with the details on Monday. Shares in the Luton-based carrier rose 3% to 518.5p in mid-morning trading as the market reacted to the news. Castlelake said it was taking the offer directly to easyJet shareholders after accusing the airline’s board of refusing to engage “meaningfully”.
The offer and the deadline
Castlelake’s third proposal values easyJet at 625p per share, a premium of roughly 59% on the 394.20p closing price on May 28 — the day before its interest first became public. The fund insisted the bid offered “compelling value” and said it would provide current investors with a “partial equity alternative” allowing them to remain invested in easyJet as a privately held business. Castlelake also claimed the proposal “substantially de-risks the execution of the company’s business plan”.
The approach comes under the UK’s City Code on Takeovers and Mergers, which imposes a so-called “put up or shut up” deadline. Castlelake has until 5pm on June 26 to either formalise its offer or walk away. The fund’s decision to go public is intended to let easyJet shareholders assess the merits of the bid and feed their views back to the board.
Why EasyJet believes the bid undervalues the airline
EasyJet has firmly rejected Castlelake’s claim that the offer reflects fair value, pointing to a range of factors it says have artificially depressed its share price. The airline noted that its stock had fallen by around 30% over the past year before news of the bid approach, driven in large part by investor fears over the impact of the Iran war on the aviation sector. The conflict has pushed up jet fuel prices and forced flight cancellations, weighing on airline stocks globally.
Despite that headwind, easyJet has delivered a strong financial performance. For the financial year ending September 2024, the airline reported a profit before tax of £602 million — a significant jump from the previous year — and total revenue of £9.309 billion. Its holiday division, easyJet holidays, has also contributed strongly to profits. For the six months to March 31, 2024, the carrier posted a statutory loss before tax of £347 million, an improvement on the prior period, with airline revenue per seat increasing. EasyJet has reaffirmed its medium-term target of delivering more than £1 billion in pre-tax profits, and the company’s balance sheet remains robust, with a net cash position and substantial liquidity.
The airline’s board believes Castlelake’s bid is an opportunistic attempt to take advantage of a temporarily weak share price, and that easyJet’s underlying prospects are far stronger than the offer recognises. The company has also criticised the proposed ownership structure, calling it “opaque”. Under Castlelake’s plan, 49% of the airline would be owned by the US fund, with the remaining 51% held by “EU nationals and potentially other investors which have not been disclosed”.
To comply with EU rules requiring European airlines to be majority-owned by EU nationals, Castlelake has partnered with two individuals: Peter Bellew, a former chief operating officer at easyJet, Malaysia Airlines and Ryanair who now runs the seed investment firm Dooks Capital, and Mark Breen, chief executive of Dublin-based Oneiros Aerospace who previously worked at Oman Air. Castlelake says these partners will invest through an EU company that will hold a controlling stake in the acquisition structure, but easyJet has expressed concern over the lack of transparency.
Castlelake’s aviation pedigree
Castlelake, founded in 2005 and headquartered in Minneapolis, is a global alternative investment manager with assets under management of $36 billion (£27.3 billion). The firm specialises in asset-based private credit and has a significant focus on aviation, having invested more than $24 billion in the sector since 2005 and maintaining relationships with over 200 airlines. Its executive chairman and founder is Rory O’Neill, who previously served as chief executive until March 2024.
The fund has a track record in airline restructurings. It played a key role in the bailout of collapsed Scandinavian Airlines (SAS), later selling its shares to Air France-KLM, and entered talks in January with bankrupt US carrier Spirit Airlines over a possible takeover. Castlelake said its proposal for easyJet would draw on that experience, describing the offer as one that “substantially de-risks the execution of the company’s business plan”.
