British budget carrier easyJet is rumored to have come under the radar of U.S. investment firm Castlelake for a possible takeover.
While easyJet has called the timing "highly opportunistic," analysts say its low valuation, slots at key airports and stable fleet make it a prime takeover target as it has struggled to boost its market capitalization since the COVID-19 pandemic.
"Few people can resist a bargain," said Chris Beauchamp, chief market analyst at trading platform IG.
The British carrier's shares have underperformed peers like Ryanair, making it attractive to potential suitors.
"EasyJet has 'looked cheap' for some time," Deutsche Bank analyst Jaime Rowbotham wrote in a note, adding that possible attractions could be its airline fleet, room to boost margins and efficiency, and the airport slots it commands.
"This latest bid speculation will likely see a boost again to the easyJet share price."
A successful holiday business and an efficient Airbus fleet have bolstered results, despite the airline's struggle to grow passenger numbers from its position between low-cost and traditional rivals like British Airways operator AIG.
EasyJet also has no direct exposure to the Middle East, where flights have been disrupted by the three-month-old Iran war.
Bank of America analysts said Castlelake's strategic plan was unclear, but the airline's fleet could be of interest. They estimated a takeover at a price of 6.50 pounds (around $8.8) per easyJet share.
Monday's high of 4.50 pounds per share valued easyJet at about 3.4 billion pounds. The stock is still down about 15% for the year.
EasyJet has drawn deal speculation for years, with slots at airport hubs in London, Paris and Geneva making it an interesting takeover target for larger players looking to expand their footprint, despite competition challenges to any deal.
Jet fuel costs have spiked since the start of the Iran war in late February, hitting the wider sector. However, longer-term easyJet has been reining in fuel costs since a pandemic-driven spike, while revenue per available seat km has risen.
Barclays analyst Andrew Lobbenberg cautioned that demand in the short-haul leisure market in Europe has been significantly affected by the conflict, and said easyJet's fairly low margins mean tough external factors hit profits quite hard.
Lobbenberg added that while easyJet is Europe's worst-performing airline stock this year, its assets, including its fleet, slots and holiday business, were undervalued. He estimated them to be worth over 11 pounds per share.
