- EasyJet shares jump on takeover rumours
- Shipping group MSC denies any involvement, but parking the companies together isn’t as far-fetched as you might think
- Wizz Air has previously been cited as being interested in EasyJet
- Why EasyJet is a takeover target and who else might be interested
Dan Coatsworth, head of markets at AJ Bell, comments:
“EasyJet is no stranger to takeover rumours and the longer its shares trade on a cheap valuation, the louder the bid speculation could get.
“Talk that shipping group MSC is potentially interested in buying the business put a rocket under EasyJet’s shares in early trading. MSC has since played down those reports, but markets rarely move on and focus on something else when there is bid talk.
“Investors will now think long and hard about who might want to own EasyJet. That explains why the shares are still trading higher despite MSC denying any involvement.
Wizz Air’s previous move
“Four years ago, the market was abuzz with talk that Wizz Air was the mystery party who had made a takeover offer for EasyJet. The orange-branded airline never publicly revealed the suitor, but press reports implied it was an open secret that Wizz was behind the move.
“The fact Stelios Haji-Ioannou’s Easy Group even republished an FT article on its website naming Wizz Air would suggest some truth to the matter.
“Wizz Air was going through an aggressive growth stage and owning EasyJet would have helped it have a greater presence in Western Europe.
Why would MSC want to buy EasyJet?
“There is some logic to MSC owning EasyJet, even if it looks like an odd match at first glance.
“MSC is involved in air cargo so already has a foot in the aviation industry. Where the two companies closer align is in serving a consumer audience. MSC has a cruise business and might take the view that EasyJet is a cheap way to expand into other parts of the consumer leisure market.
“EasyJet is a big name in low-cost travel, and it has a fast-growing package holidays arm. Bolt those together with a cruise business and you’ve got the right ingredients for a bigger beast in the leisure industry.
“EasyJet’s board and shareholders might not see it that way. The business is growing perfectly well without needing to dip its toe in the cruise space. EasyJet is all about getting people from A to B without breaking the bank. While MSC is at the more affordable end of the cruise market, it feels like a step too far for EasyJet to want to enjoy life at sea.
“EasyJet founder Stelios Haji-Ioannou and his family remain the largest shareholders in the airline, owning 15.27%. Haji-Ioannou’s EasyGroup already has a cruise business – unsurprisingly, called EasyCruise – meaning that EasyJet had a natural acquisition target if it was desperate to set sail in a new sector.
Who else might want to buy EasyJet?
“What’s more realistic is a rival airline bidding for EasyJet, potentially an American player looking to expand geographically or International Consolidated Airlines (IAG).
“IAG is flying high after a delayed recovery from the Covid pandemic and is now in a much stronger position financially and strategically. There might be some competition issues with certain routes, but if ever there was a time for IAG to strike while the iron is hot, it’s now.
“EasyJet’s shares are cheap, trading on a mere 6.3 times forward earnings, and the stock has been stuck in a 400p to 600p range since 2023. Shareholders might be getting frustrated that the market isn’t placing a higher value on EasyJet, so they could be receptive to a bid if the price is right. Stelios Haji-Ioannou could be the blocker, however, as he would no doubt want top dollar.”
