Easyjet shares crash on fears of EU probe
Shares in Easyjet plummeted on Wednesday after reports the European Union was preparing a probe into the ownership of airlines, potentially complicating the carrier’s mooted takeover by Apollo.
The London-listed budget airline said this month it was likely to accept an all-cash offer from the US investment behemoth, trumping an earlier bid from another US buyout firm, Castelake.
But the takeover has been cast into doubt by an EU review into airline ownership rules, which may look to prevent foreign investors from gaining effective control of carriers, Reuters reported, citing an unnamed EU official.
The assessment of airline ownership rules was not prompted by Apollo’s takeover of the company and forms part of a broader review into airline services, City PM understands.
EU rules dictate that the continent’s airlines must be majority owned by European nationals due to their role as strategic national assets. Castlelake, which is based in the US, had looked to skirt the restrictions by setting up a new vehicle run by two European nationals. Apollo is yet to reveal how it would legally own the company.
“[The review] is to ensure that foreign investors don’t have full control,” the official told Reuters, asking not to be named. “We need to make sure we have sufficient headroom when it comes to control.”
The EU rules still apply to Easyjet due to its Austrian subsidiary.
Shares in Easyjet, which have surged in recent months on hopes of a takeover, cratered more than 14 per cent following the report.
“The scale of the move shows how nervous the market is over private equity’s ability to meet the European Commission’s demands,” Mark Kelly, chief executive of shareholder advisory firm MKI Advisors, told City PM. “Precedents of a healthy airline being taken over are very few and the framework the EC will apply will likely be more rigid than when we have seen comparable insolvent situations.”
The official told Reuters the review would look to clarify which kinds of corporate structures were allowed, with a particular focus on control and ownership.
The person told the outlet that Apollo, Castlelake and Easyjet had not spoken to the European regulators about the details of their proposed deals.
Easyjet and Castlelake declined to comment. Apollo was contacted for comment.