EasyJet's biggest shareholder has cast serious doubt on the proposed takeover by US private equity firm Castlelake, warning that the deal may collapse over valuation and regulatory issues. The intervention from Stelios Haji-Ioannou, the airline's founder and largest individual investor, threatens to derail a transaction that would value the budget carrier at around £4.5bn.
Stelios opposes Castlelake's bid
Stelios, who controls a 15% stake through his investment vehicle, told the Guardian that Castlelake's offer of 520p per share significantly undervalues the company. He argued that EasyJet's strong balance sheet and recovery prospects justify a price closer to 700p, a premium of more than 30%. The entrepreneur also expressed concerns that the takeover would saddle the airline with excessive debt, jeopardising its low-cost model.
Castlelake, which already owns a 12% stake in EasyJet, announced its preliminary approach earlier this month. The bid requires approval from 75% of shareholders and must clear antitrust reviews in several European markets. Stelios's opposition means the deal faces an uphill battle, as his stake alone could block the required majority.
Regulatory and financial hurdles
Competition authorities in the UK, France, and Italy are expected to scrutinise the merger closely, given EasyJet's significant presence at airports such as Gatwick, Orly, and Milan Malpensa. Analysts at Bernstein warned that remedies could include forced divestitures of landing slots, which would reduce the deal's synergies. Castlelake has yet to comment on the regulatory outlook, but insiders suggest the firm is prepared to offer concessions.
On the financial side, Castlelake plans to finance the acquisition through a combination of debt and equity. However, Stelios's camp claims the debt burden would raise EasyJet's leverage to unsustainable levels, potentially forcing asset sales or fare increases. The airline's current net debt stands at £1.2bn, and the proposed financing could push that to over £3bn.
Market reaction and next steps
Shares in EasyJet fell 2% on Monday to 498p, reflecting investor scepticism about the deal's completion. The stock had rallied 15% since the bid was revealed, but the latest comments have erased some of those gains. Analysts at Jefferies said the probability of a successful takeover has dropped to 40%, down from 60% previously.
Castlelake has until July 20 to make a formal offer or walk away under UK takeover rules. The firm could raise its bid to win over Stelios, but doing so would reduce the potential returns for its investors. Alternatively, Castlelake might attempt to negotiate directly with EasyJet's board, which has remained neutral so far. The airline's management, led by CEO Johan Lundgren, has declined to comment on the bid.
Stelios, known for his long-running feuds with EasyJet's management over strategy and costs, has not ruled out launching his own rival bid. However, he said his priority is to ensure the airline remains independent and focused on its core low-cost model. 'EasyJet does not need a private equity owner to succeed,' he said. 'It needs a board that listens to shareholders and sticks to what made it great.'
Industry context
The takeover battle comes as the European airline industry consolidates, with IAG's acquisition of Air Europa and Lufthansa's purchase of ITA Airways still pending regulatory approval. EasyJet's strong recovery from the pandemic, with passenger numbers returning to 2019 levels, has made it an attractive target. However, rising fuel costs and airport charges are squeezing margins across the sector.
If the Castlelake deal fails, EasyJet could remain a takeover target for other suitors, including rival airlines or infrastructure funds. But any future bid would likely face similar valuation and regulatory challenges. For now, the fate of the airline hangs on the negotiations between Castlelake and its most vocal shareholder.
