easyJet Shares Surge on Potential Takeover Interest from Castlelake

British low-cost airline easyJet said it had noted possible takeover interest from US-based private investment firm Castlelake, in a statement released on Monday. The airline's shares surged by more than 12% in early trading following the news.

Castlelake confirmed rumours on Friday, saying that it was "in the early stages of considering a possible offer" and stressed that no approach had yet been made to easyJet's board. "There can be no certainty that any offer will be made, nor as to the terms of any offer."

The British low-cost airline said in a statement that "the Board is clear in its duty of aiming to maximise shareholder value and will consider any proposal, should one be made". However, it added that "in any assessment, the Board will be especially mindful of its valuation and deliverability".

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

Coatsworth said the airline was facing its most challenging period since the COVID-19 pandemic, largely because of higher jet fuel prices linked to the closure of the Strait of Hormuz following the conflict involving Iran.

The airline's statement also said: "The Board notes the highly opportunistic timing when easyJet's share price is temporarily depressed due to the current situation in the Middle East and its impact on customer confidence and jet fuel prices."

Shares in easyJet traded 12% higher at 445.80p each in London on Monday morning. They have fallen 23% in the last 12 months amid higher fuel costs and disruption to travel caused by conflicts in the Middle East.

EasyJet added that it remained 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", adding that the company was highly confident in its strategy and ability to "deliver attractive long-term value for shareholders".

"The Board notes the considerable regulatory, financial and other execution challenges associated with a potential takeover of easyJet."

"There is logic to Castlelake being interested in the business, given it has a history of investments linked to the aviation sector," said Coatsworth. "The big unknown is whether it would want to run easyJet in its current form or simply flip it when market conditions improve."

Under UK takeover rules, Castlelake has until 26 June to either make a formal offer for easyJet or announce that it does not intend to proceed.