Castlelake’s EasyJet bid may lift TAP sale valuation

Castlelake’s improved £5.5 billion bid for EasyJet could have implications for Portugal’s ongoing TAP privatisation, by reinforcing investor appetite for European aviation and potentially supporting a higher valuation for the Portuguese carrier. The US investment firm has until August 3 to submit a final offer after winning EasyJet’s backing to proceed.

EasyJet shares rose 9.3% on Monday to £6.10, still below the £6.90 a share offered by Castlelake, suggesting investors remain uncertain that the deal will close. Even so, the bid represents a premium of more than 70% to the airline’s share price before the fund’s first approach, underlining the scale of interest in the sector.

That matters for TAP, which Portugal is selling through a 49.9% stake, including 5% reserved for employees. Financial analyst Nuno Barradas Esteves told ECO that, in this context, TAP could benefit from an upward revision to its valuation in the privatisation process, which he placed at between €1.7 billion and €2 billion. He said the case rests on TAP’s economic and financial performance, its position on routes linking Europe, Brazil and the US East Coast, and improved medium-term prospects for aviation.

The possible EasyJet deal could also affect the wider European airline landscape. Barradas Esteves said Castlelake, which is not an airline operator and is better known for aircraft leasing, engine leasing and airline financing, would most likely need a European partner. He said Air France-KLM appears the industrial partner most aligned with that strategy, at a time when the Franco-Dutch group is also competing with Lufthansa in the TAP sale.

Castlelake was part of the consortium that agreed to buy SAS in 2023, before later agreeing to sell its stake to Air France-KLM. Air France-KLM chief executive Ben Smith said in June he was not involved in Castlelake’s EasyJet approach, but when asked about possible interest in the British airline replied “maybe”, adding that he would “certainly” take a call from Castlelake.

Originally published at Eco.pt