Easyjet to go private ?

Shares in easyJet have risen after the carrier’s founder, Stelios Haji-Ioannou, said he might take the company private.
The shares were up 2.5 percent or four pence to 160.75p by midday on Monday, valuing the airline at 627.7 million pounds.

EasyJet declined to comment. But a spokesman for easyGroup, Haji-Ioannou’s holding company, confirmed at the weekend that the businessman was considering taking the firm private.

“It is an option but there is no further comment,” the easyGroup spokesman quoted Haji-Ioannou as saying on Monday. Haji-Ioannou’s family own about 41 percent of easyJet’s shares. But the entrepreneur has been selling down his stake to fund other projects since stepping down as chairman in 2002.

Analysts said the news was not unexpected and should underpin the share price which has halved since January.

“This possibility has been around since easyJet’s last profits warning and I would say it’s very feasible,” said Mike Powell, aviation analyst at Dresdner Kleinwort Wasserstein. “Clearly it’s going to be a factor in the share price.”

Powell said taking easyJet private would allow the firm to sit out a period of high fuel prices and competition with dozens of new budget airlines that have eaten into company profits in the past two years.

EasyJet shares plunged last month after the airline said 2004 pre-tax profits could fall below market forecasts due to high fuel costs, a price war with Irish airline Ryanair and competition with similar no-frills European carriers.

Its shares had traded above 500 pence in May 2002, when it had a market value of about 2.0 billion pounds.

But sector analysts said that, despite recent weakness, a well-established player like easyJet was still well positioned to weather any shake-ups in the European budget airline sector.

“If he took the airline private now and sold it in two years when oil prices are lower and there is less competition, he would look very clever,” said Powell who rates the stock a “hold”.

Analysts believe Haji-Ioannou, who founded easyJet in 1995, could act if the shares come under further pressure, with any bid likely to carry a 30 percent premium to the current share price. That would take the shares to about two pounds.

The Sunday Express newspaper reported the businessman was thinking about borrowing to fund a 650 million pound takeover.

A sale of Haji-Ioannou’s 27 percent stake in Stelmar Shipping may also help fund the bid, analysts said.