(Sharecast News) - EasyJet said on Monday that it is not in talks with Castlelake after the US investment firm announced late on Friday that it was in the early stages of considering a possible offer for the budget airline.
"The board of easyJet has not had any discussions with, nor received any approach or proposal from Castlelake," it said.

"The board is clear in its duty of aiming to maximise shareholder value and will consider any proposal, should one be made. In any assessment, the board will be especially mindful of its valuation and deliverability."

The statement came after Castlelake said late on Friday that it was considering a bid, sending US shares of easyJet soaring.

EasyJet noted the "highly opportunistic" timing, pointing to the fact that its share price is "temporarily depressed" due to the current situation in the Middle East and its impact on customer confidence and jet fuel prices.

The company also noted the "considerable" regulatory, financial and other execution challenges associated with a potential takeover of easyJet.

"EasyJet is in a position of strength, underpinned by an investment grade balance sheet with a net cash position, alongside strong customer satisfaction and high employee engagement," it said. "The board remains highly confident in easyJet's strategy and its ability to deliver attractive long-term value for shareholders. The company remains focused on executing its medium-term target of delivering greater than £1 billion profit before tax."

EasyJet said there can be no certainty that an offer will be made, nor as to the terms on which any offer might be made.

Under UK takeover rules, Castlelake has until 1700 BST on 26 June to announce a firm offer or walk away.

At 1208 BST, the shares were up 9% at 433.70p.

Susannah Streeter, chief investment strategist at Wealth Club, said: "The airline has been hit by a severe bout of turbulence sparked by the war in Iran and now private equity firm Castlelake appears ready to pounce. The airline has been battling headwinds from escalating tensions in the Middle East, which have rattled consumer confidence, driven up fuel costs and cast a shadow over the outlook for European travel demand.

"As a result, its valuation had dropped to a level not seen for more than three years, leaving the company looking vulnerable despite its strong liquidity position. Castlelake clearly believes the market may be underestimating easyJet's longer-term earnings potential and the resilience of its network. easyJet appears open to discussions but does not seem in the mood to accept a bargain-basement offer, calling the bid 'highly opportunistic'.

"Castlelake is well known for investing in aircraft leasing and aviation finance. It already owns a small stake in easyJet and, under UK takeover rules, would need to offer at least 403.23p a share if it proceeds with a formal bid. The move is still at a very early stage and, while there is no certainty an offer will materialise, it clearly fits well within its portfolio."

Dan Coatsworth, head of markets at AJ Bell, said easyJet's biggest shareholders are unlikely to accept a takeover bid unless there is a knockout price.

"Castlelake is preying on the weak, pouncing when EasyJet faces its biggest headwind since the global pandemic. Investors won't want to sell in the darkest of hours unless they are getting generous compensation," he said. "A bid is the last thing EasyJet's management want to happen, given they've already got their hands full trying to navigate a weak market backdrop and concerns around post-summer fuel shortages.

Coatsoworth said easyJet's shares were beaten up as soon as the Middle East crisis unfolded in March, yet they've rallied hard over the past week or so amid hopes of a resolution to the conflict. "Admittedly, some of that share price appreciation might have been word getting out that Castlelake was sniffing around easyJet," he said,

"The fact the shares have 'only' jumped 12% on Castlelake disclosing takeover interest implies the market doesn't believe a bid will succeed.

"There is logic to Castlelake being interested in the business, given it has a history of investments linked to the aviation sector. The big unknown is whether it would want to run easyJet in its current form or simply flip it when market conditions improve. There are also question marks around how Castlelake as a US business would overcome EU rules that prevent a non-EU owner from holding a majority share of an EU airline."

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