Apollo's $7.7B EasyJet deal places Jet2 in private equity crosshairs. Jet2's low PE ratio and 60% rally make it a candidate, Hargreaves Lansdown says.
Apollo Global Management's $7.7 billion deal to take EasyJet private has turned the spotlight on other European budget carriers. Jet2, a rival U.K. low-cost airline, is emerging as a potential next target.
Anna Macdonald, investment strategy director at Hargreaves Lansdown, told CNBC that Jet2's low-cost model and depressed valuation make it a candidate for private equity interest. "Jet2, for example, was trading on a price-to-earnings ratio of 6-7 times. It's now gone up about 60% since that low," she said. "We might see private equity start to look at that."
Jet2's shares rose 0.5% in afternoon trade Friday. The company declined to comment on market speculation. A Jet2 spokesperson told CNBC: "We do not comment on market rumour or speculation."
Macdonald noted that U.K. equity valuations have lagged global peers, making London a "fertile hunting ground" for buyers. She said flag carriers are a tougher case than budget airlines, with less obvious upside.
Apollo's bid for EasyJet cleared the path after rival Castlelake withdrew its $7.3 billion offer Thursday. EasyJet shares were down 0.48% in afternoon trade Friday, having closed the previous session 2.8% higher.
Macdonald said the airline sector faces multiple pressure points. "It is a tough industry, it's fairly low margin, it's very cyclical... and also highly-regulated," she noted. "Costs can vary a lot, and also demand can vary a lot." In a private setting, she added, management might rethink financing to reduce capital intensity, potentially passing savings to consumers.
Apollo's Alpha Score stands at 52 out of 100, reflecting a mixed outlook. The firm's active portfolio spans financials, though its airline bet signals a broader appetite for cyclical assets at depressed valuations. Jet2 currently trades at roughly 10 times earnings after its recent rally. A buyout would need to offer a meaningful premium to that level, typically 30% to 40% for private equity deals. No formal approach has been made.
Drafted by a large language model from the source reporting linked above, then screened by automated publishing checks. It is not read by a journalist before publication. Some articles cite our Alpha Score. Verify prices and figures against the original source. Educational coverage, not personalized advice.