EasyJet profit slides on Iran war impact as EU rules cloud takeover bids
EasyJet Faces Profit Decline and Regulatory Uncertainty Amid Takeover Bids
By Shashwat Awasthi
July 23 (Reuters) - Takeover target EasyJet's third-quarter profit tumbled 70% as the Iran war led to volatile fuel prices and made travellers wary, though pre-tax earnings beat forecasts and the airline indicated clearer skies heading into peak summer.
EasyJet's shares rose almost 6% after the results on Thursday, recouping some losses after a 12% slump on Wednesday when Reuters reported the European Union may tighten airline ownership rules, potentially complicating U.S. investment firms Apollo and Castlelake's rival takeover bids for the airline.
The British budget carrier said consumer confidence was increasing into the peak northern hemisphere summer period and there was strong demand from travellers booking tickets closer to the date of travel.
Market Reaction and Investor Sentiment
Some in the market, however, remained focused on the potential takeover, which has been in the offing since late May and had driven up easyJet's shares.
EU Review Adds Uncertainty
"This (EU review) may not scupper the takeover but it certainly adds a layer of uncertainty reflected by the shares declining so sharply (yesterday)," said Neil Wilson, UK investor strategist at Saxo Markets.
Takeover Battle Intensifies
Runway to Takeover
Castlelake has been vying to take control of easyJet since May, but Apollo entered the fray this month and the carrier backed its £5.7 billion bid, withdrawing support for Castlelake's lower proposal and setting the stage for a possible bidding war.
Regulatory and Strategic Considerations
Easyjet CEO Kenton Jarvis said the airline had not heard from the EU following Reuters' report on Wednesday, but was open to contact in the future.
"We are in constant contact with our regulators... But right now, without a firm offer, that would be a little premature," he said.
Castlelake, which has partnered with two EU nationals in its bid, has until August 3 to make a firm offer or walk away. Apollo has until August 7 but has not detailed its plan to satisfy ownership requirements.
Goodbody analyst Dudley Shanley said that if a European airline joined the bid it would help in terms of the EU review, even if it could prompt a sharper focus on competition.
"I think it would be good for the sector in general because it probably ultimately leads to some capacity consolidation," he said.
Financial Results and Analyst Reactions
EasyJet reported an £85 million ($113.8 million) profit for the three months to June 30, well below the £286 million a year ago but higher than JPMorgan and RBC analysts' estimates.
($1 = 0.7472 pound)
(Reporting by Shashwat Awasthi and Yamini Kalia in Bengaluru, Joanna Plucinska in Farnborough, Alessandro Parodi in Gdansk; Editing by Mrigank Dhaniwala, Louise Heavens and Emelia Sithole-Matarise)
