EasyJet Shares Surge on $7.3 Billion Takeover Bid from Castlelake
US private equity firm Castlelake has made a revised offer for the UK budget airline, which has been grappling with rising fuel costs.
EasyJet shares rose nearly 10% on Monday morning following a $7.3 billion takeover proposal from U.S. private equity firm Castlelake. The London-listed shares reached a new 52-week high.
The UK-based budget airline announced Sunday that it had accepted the 5.5 billion pound offer, which equates to approximately $7.3 billion. This comes after Castlelake had previously rejected four earlier bids.
Castlelake has until August 3 to finalize the offer of $6.90 per share. This potential acquisition occurs as low-cost carriers are experiencing significant pressure from a jet fuel crunch.
The conflict in Iran, which led to the blockage of the Strait of Hormuz for several weeks, impacted the aviation industry. This vital maritime route typically handles about 40% of Europe's jet fuel supply. The disruption more than doubled fuel costs for European airlines, prompting the International Air Transport Association to warn that global airline profits could be halved this year.
In its most recent financial report for the six months ending March 31, EasyJet reported a pre-tax loss of 552 million pounds, despite a 12% increase in revenue to 4 billion pounds.
In a joint statement, EasyJet and Castlelake indicated that Castlelake respects the airline and its employees and intends to support its future growth and transformation. Castlelake is also reportedly supportive of EasyJet's fleet modernization program, viewing it as crucial for the company's long-term competitiveness, efficiency, and sustainability.
EasyJet is known for its distinctive orange fleet and operates from major airports including London Gatwick and Paris-Charles de Gaulle. Like many budget airlines, it charges additional fees for services such as checked baggage, seat selection, and in-flight meals.
Other budget airlines have also been affected by increased fuel costs. Spirit Airlines ceased operations in May after filing for bankruptcy for the second time in two years, a situation exacerbated by its operating losses and the fuel crunch.
Industry experts have cautioned that American travelers may face an expensive summer for European vacations due to airlines reducing flights, adding surcharges to transatlantic routes, and increasing ticket prices. Many carriers are also raising checked bag fees to offset soaring fuel expenses, which constitute one of the largest operating costs for airlines.