Global alternative investment fund Castlelake has disclosed its 4.74 billion pound (USD 6.26 billion) takeover bid for British low-cost airline easyJet. As per the reports, the bid has now been backed by former Malaysia Airlines CEO Peter Bellew, who was also the chief operating officer of the United Kingdom-based carrier. It must be mentioned here that easyJet has already rejected three proposals from the American investment firm.
Minneapolis-based Castlelake, which manages about USD 38 billion in assets and has invested over USD 24 billion into the aviation sector since 2005, said the latest move would allow easyJet shareholders to consider the bid’s merits and relay their views to the low-cost carrier ahead of a June 26 deadline for a formal offer.
Castlelake’s 6.25-pound-per-share proposal represents a premium of about 57% to easyJet’s share price of 3.94 pounds on May 29 before the American venture disclosed its interest in the low-cost carrier. The two previous failed bids had figures worth 5.6 euro and 6.0 euro, respectively.
Castlelake also said its arrangement for easyJet’s ownership takeover is consistent with those adopted by other European airlines to ensure full regulatory compliance on the continent.
The venture also plans to offer a partial equity alternative so that easyJet shareholders remain invested in the airline as a privately held business in partnership with the alternative investment fund, subject to a maximum participation limit.
As per the European Union’s (EU) rules, any move by Castlelake to acquire easyJet would have to meet the politico-economic union’s ownership requirements, despite the budget carrier being based in the non-member nation called the United Kingdom.
The reason lies behind easyJet’s move of establishing an EU-based subsidiary, “EasyJet Europe,” to maintain access to the intra-EU aviation market. As per the EU rules, Castlelake would need to ensure that the ownership criteria are preserved, any violation of which will bring the risk of losing traffic rights in the continent.
To deal with this, Castlelake has brought Bellew, along with Mark Breen (Managing Director at Quinbrook Infrastructure Partners), two prominent European citizens, as the individual investors for the takeover deal.
While Bellew, apart from being an easyJet veteran, held a leadership role in Ryanair too, Breen has held senior board roles at budget carrier Flyadeal and other airlines (notably in the Middle East). Breen also founded the Irish-based consultancy Oneiros Aerospace.
As per Castlelake, Bellew and Breen would invest and participate in the proposed acquisition of easyJet through their ownership and control of an EU-domiciled company, which would have a majority share in the overall structure.
“Bellew has recently made investments in EasyJet with the acquisition of a relatively small number of shares over the course of March-May. This proposed structure is consistent with structures adopted by a number of other European airlines that are subject to the same EU ownership rules as [EasyJet]. [We are] highly confident that the transaction will be structured and completed in full compliance with all applicable regulatory requirements, with any required formal approvals obtained swiftly,” the alternative investment fund remarked further.
It also cited easyJet’s “unwillingness to engage meaningfully” as a reason for going public with the bid.
While Castlelake said it aims to support easyJet, respecting its “valuable” assets and sustaining its network, the low-cost carrier, in response, stated that 51% of the proposed ownership vehicle would be held by EU interests, including potential investors whose identities have not been disclosed, apart from describing the structure as “opaque.”
“The Board believes that the Third Proposal represents an opportunistic attempt to acquire easyJet ‘on the cheap,’ and that it is therefore not in the best interests of easyJet shareholders,” the budget carrier said in a statement.
EasyJet also reiterated that it was focused on its medium-term targets, apart from growing its holidays business, which has accounted for a steady increase in share of profit despite geopolitical uncertainties.