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EasyJet attracts investors who spot a bargain as they look to takeover the airline

EasyJet, a British budget airline, has attracted the attention of?U.S. Castlelake, an investment firm, is considering a takeover. Analysts say that while easyJet called the timing of this takeover "highly opportunistic", its low valuation, slots in key airports, and stable fleet make it an attractive target for a takeover.

Chris Beauchamp is the chief market analyst for trading platform IG.

Shares Underperform Rivals

Potential suitors are attracted to the British carrier because its shares have performed better than those of competitors like Ryanair.

Jaime Rowbotham, a Deutsche Bank analyst, wrote that EasyJet had 'looked 'cheap' for a while. He added that its airline fleet could be attractive, as well as the room it has to increase margins and improve efficiency.

This latest bid speculation is likely to see the easyJet stock price rise again.

HOLIDAY BUSINESS BOOMS

A good holiday?business, and an efficient Airbus?fleet have helped to boost results despite the airline struggling to increase passenger numbers. It is positioned between traditional and low-cost?rivals such as British Airways operator AIG. EasyJet has also no direct exposure to Middle East, where flights were disrupted for three months by the Iran War.

Bank of America analysts stated that Castlelake's strategy was unclear but its fleet might be of interest. They estimated that a takeover would cost PS6.50 for each easyJet share.

EasyJet's share price of PS 4,50 on Monday was equivalent to approximately PS 3,4 billion. The stock has still fallen about 15% this year.

EasyJet's?slots? at airport hubs like London, Paris, and Geneva have been a source of deal speculation for many years. This is despite the fact that any takeover would be fraught with competition issues.

'FEW PEOPLE CAN RESIST A BARGAIN'

The cost of jet fuel has risen since the beginning of the Iran War in late February. This has affected the entire sector. EasyJet has been reducing fuel costs over the long-term since a pandemic spike. Revenue per seat km is also up.

Barclays' Andrew Lobbenberg warned that the conflict has had a significant impact on the demand for short-haul leisure travel in Europe. He also said easyJet’s relatively low margins means external factors have hit its profits quite hard.

Lobbenberg said that even though 'easyJet' is Europe’s worst performing airline stock, its assets, including its slots, holiday business and fleet, were undervalued. He estimated that they were worth more than PS11 per share.

(source: Reuters)