EasyJet is an obvious takeover target, but US approach may not be a flyer

A share price gain of only 10% on a possible takeover approach is a meek reaction. If the stock market truly believed that Castlelake, a US investment fund, stood a decent chance of buying easyJet , you would expect the target’s stock to fly significantly higher. Scepticism is the right stance until at least three factors become clearer. First, would the two sides even be vaguely in the same landing zone on valuation? EasyJet’s description of Castlelake’s timing as “highly opportunistic ” was boilerplate rhetoric (all bids are opportunistic to a degree) but in this case it is clearly possible that all European airlines’ prospects could be brighter within a couple of months. It all depends on the price of jet fuel, which itself depends on resolution of the Iran war, and also how the peak summer season shapes up. The conflict has knocked consumers’ willingness to book ahead, but that does not mean they will not show up for overseas summer holidays if disruption is minimal. City analysts still estimate that easyJet’s pre-tax outcome could be as low at £100m this year, which is virtually a wash-out against £665m a year ago. Yet the half-year numbers only a fortnight ago kept alive the “medium-term” target of more than £1bn “as conditions normalise”. …