Easyjet Buyback

[Ice Man]

Just announced. Stelios planning to mount buy back bid for Easyjet.

[FlapsOne]

"Just announced".......where, when, by whom?

[Dewdrop]

There was speculation at the weekend, where's the announcement ?

[InFinRetirement]

It appeared in the Sunday Express financial paper. Stelios in a lengthy story, reportedly stated that he is trying to mount a buy-back of Easy Jet, and is to sell the family interests in their Stelmar shipping interests to raise some additional capital.

[Runway 31]

Taken from today's Scotsman:

STELIOS Haji-Ioannou, the flamboyant entrepreneur who retains a 41 per cent shareholding in EasyJet, the listed no-frills airline that he founded, has stoked speculation that he might seek to buy the company back and take it private.

Stelios said in a weekend interview that a return to private ownership remained "an option" and indicated that he would also consider an offer from outside bidders.

"I’m mature and grown up enough to realise that if there is a good enough offer, I’d consider it," he said.

His remarks follow a slide in the EasyJet share price over the past month since the company warned that profits were being hit harder than expected by competition from rival operators and soaring fuel costs.

The shares are bumping along near 156.75p, down from 380p in the past year and valuing the business at some £625 million, against a peak of nearly £2 billion when Stelios announced he was stepping down as chairman back in April 2002.

Speculation he could be tempted back to the company has been doing the rounds in the City for some time now.

Several analysts - including Chris Avery at JP Morgan and Andrew Lobbenberg at ABN Amro - have argued a case for privatisation in current conditions. An added attraction is that EasyJet remains in a strong cash position with £340m in the bank at the end of March.

Stelios founded EasyJet in 1995 with the aid of a £5m loan from his father.

[hobie]

it was on one of the national radio station news prog's this morning (can't rem which one) but share price has dropped so much now that "the Man" has decided he wants to take the company private ...... didn't Richard B do that some years ago for the same reason?

[easyprison]

LONDON (Reuters) - Shares in EasyJet have risen on news that founder Stelios Haji-Ioannou is considering taking the company private.

The shares were up 2.6 percent, or four pence, at 160.75p by 9:25 a.m. on Monday, valuing the airline at 627.7 million pounds.

An EasyJet <EZJ.L> spokesman confirmed on Sunday that Haji-Iannou, who set up the airline in 1995, was considering taking the firm private, but said no final decision had been reached.

Media reported earlier that the businessman, alarmed at a steep fall in the airline's share price since 2002, could borrow to fund a 650 million pound takeover. Haji-Iannou's family owns 41 percent of EasyJet.

EasyJet shares plunged last month after the airline said 2004 pre-tax profits could fall under market forecasts due to high fuel costs, a price war with Ireland's Ryanair <RYA.I> and competition with similar no-frills European carriers.

EasyJet shares traded over 500 pence in May 2002.

[newswatcher]

Also from the BBC (http://news.bbc.co.uk/1/hi/business/3866741.stm)

[PAXboy]

Before we start relaying that it's a done deal, the word that Stelios uses is considering.:rolleyes:

--------------------
"I tell you, we are here on Earth to fart around, and don't let anybody tell you any different." Kurt Vonnegut, Jr.

[RHINO]

Yawn....

You folk are seriously gullible. If Stelios or whatever he is called had said anything and I mean anything to the company about a bid, then the company would have had to make an announcement to the stock exchange.

I don't see one.

[PPRuNeUser0172]

Appeared in the business section of the telegraph today, Stelios is working on a £650 million pound deal to buy back the no-frills airline

[RAT 5]

Shares down from 3.80. Hm! A few months after 9/11 they were 5.68. That means they are now about 25% of then. Quite a crash.

If Stelios, or anyone else, buys ej and takes it private, how will that effect the employees' share option scheme where the option buy price is now higher than the free market price?

I heard stories a couple of years ago that, in response to a cry for better wages in some ej companies, the response was "you've got the shares and that's enough." Doesn't look quite so bright now, I bet.

[smallpilot]

As someone said, no official announcement by the Stock Exchange but this is the way of people putting out feelers to judge what the response would be.
If Stelios were in a position to raise the finance then its a possible runner. But before you all get carried away the rumoured £650 million bid equates to approx £1.70 a share, so hardly a massive premium on current price.
For those of you with share options at a higher price then I'm afraid its tough luck. All you have is the option (but not the obligation) to buy shares at the strike price on a given date in the future. If the strike price is higher than the current price your option has expired worthless and you just buy shares in the mkt at the current (lower) price.

I'm afraid the City is always rather nervous about airlines - too much 'event' and 'political' risk and this has been compounded in Easyjet's case by the spate of recent profits-warnings. With that in mind, if the company continues to perform poorly (and if Stelios or someone else doesn't take it private) then expect to see increased pressure from the major shareholders (usually pension fund managers etc) for changes, maybe even heads to roll at board level :ooh:

Note to moderators - this is another example of a topic that could be incorporated in a 'Financial' Forum?

[Flap 5]

smallpilot,

Your post may confuse some employees with share options. It is not the case that you have to buy the shares at a 'given date in the future' but at any time up to the maximum of 10 years since the options were issued. Therefore the share price may well recover which would take holders of options out of the current low share price and in to a more respectable value for them to trade.

[Dewdrop]

Why would anyone want Stelios back? He left because it had grown into a large complex company that he did not have the skills to manage.
Everything he has touched since has turned to Sh*t! I think the share price would fall if he returned. If the city don't want him there is no chance.

[airmail]

Flap 5

Re Share Options. This is not normally the case. An employee will be granted share options at a given price which they can then redeem at a certain date in the future. The reason for this clause is that share options are usually granted at a discount to the then current market price so it stops employees from cashing in immediately and moving on to another organisation where the same thing may happen. This is why there are so many examples (not just easy) of share options being in negative positions.

Dewdrop

Not strictly true. Stelios left because the City wanted to see a businessman at the helm rather than a serial entrepreneur. With regards to the share price falling if he returned-the question is what share price if he takes it private?

[dontdoit]

Stelios still controls only 41% of eJ shares. The remaining 59% he does not control.

The company shares are trading at a bargain price for anyone who has the money at the moment.

Sarge? No....Rosemary the telephone operator? No...Ryanair, the only airline with the money in the bank to buy them? Could be!!!

(Cue Hong Kong Phooey music)

This is the consolidation of which much has been spoken recently. All those people who thought they'd be whipping the big boys' asses...and all they do is end up fighting amongst themselves and then consolidating....

Outing other posters on PPRuNE is frowned upon, particularly moderators. Don't even think about it. Squid.

[Lapsed PPL]

Maybe it's a ploy by Stelios to stop the rot in the heavy share price decline by suggesting he's interested in buying the 59% of shares he doesn't already own. He's seen what happened to Marks and Spencer shares recently. Maybe he's really hoping for a higher share price so he can reduce his holding from the current 41%. Meanwhile the market is not convinced, down 1.9% today to 155. Have a look at www.bigcharts.com and enter uk:ezj for the latest.

[SHIMMY]

Brings up some scenarios

We might see the good riddance of RW - whoopee - a long awaitied event - maybe Barbara would come back then!

OR

heaven forbid - MOL gets his dirty arrogant hands on EZY - I think I will retire now

[smallpilot]

some thoughts...

No Chance of Ryanair buying Ezj - they have enough problems of their own and started the whole 'profit-warning' ball rolling earlier this year.

41% is a massive stake-holding in city terms. Under City rules if anyone buys more than 30% of the shares in a firm then they must declare their intentions. Thats why Mr Glazer owns 29.9% of Man Utd - he doesnt want to go over the 30% until he is sure he will launch a bid. You cant change your mind for 6 months.

If Stelios is to be serious about buying Ezj back then he probably needs to talk to around a dozen of the large fund managers who will prob own 2-3% each of the shares. if they want to sell then the rest will soon fall into line.

Why sell at 170p? simple- Its going to be a very long time before we see anything like the heady heights of 300p + for the stock, after all this is a firm that has issued 2 profit warnings in the past few months, and thats ahead of the key summer season. To take 170p now may be a lot better than what might be on offer in a few months.
As I said before the airline sector is out of favour just now - fuel costs, competition, threat of terrorism etc and the city is worried that Ezj's expansion plans are way too ambitious.

Sorry folks but this is not a stock I would want to hold for anything other than a very short-term bounce, but bail out if it doesnt happen. For those who are already long you could sell some above-the-money calls in order to raise a bit of cash, or think about an exit stratetgy if things get worse...

[FlapsOne]

The city have been 'worried' about EZ's expansion plans for 5 years now.

If they are always worried, maybe someday they will be right!!!!!!!!

[dontdoit]

Smallpilot - Wrong! Don't confuse a "profit warning" with "no cash in the bank"...RYR are VERY cash-rich, ok they might be worried about this year's PROFITS, but they would have the cash to buy eJ and enough left over for still more brand new 737-800s!

[stormin norman]

Stelios founded EasyJet in 1995 with the aid of a £5m loan from his father.

He can always go back to his dad for another handout.....easy money !

[fiftyfour]

Easyjet has huge commitments for aircraft, but no certainty as to where the passengers will come from or if they will pay the ticket price that Easy needs to keep afloat. The numbers looking forward don't add up. Public companies have to have accounts that are very transparent, so that investers know where they stand. The sort of help that Easy will need over the next few years from the banks would wipe out the share price and prevent any serious lending by the banks under their normal lending criteria. If they lend money and help Easy out of the pickle they are in, the banks would want a very large slice of the company profits(or assets if it fails) down the line. These deals are only available to private companies where the books are not available for public scrutiny. Negotiations are much easier when dealing with just one or two owners, especially if they have other businesses/assets to offer as collareral against loans.

Same thing happened at Virgin Atlantic about 15 years ago. Virgin survived, and the banks that helped Branson did very nicely too.

[FlapsOne]

54

What 'pickle' are EZ in exactly?

A few hundred millions in the bank and secure finance for all remaining aircraft deliveries, 85% load factor.

It was a profit warning, not a loss warning!

[Snigs]

easyJet is the bedrock of the easy brand. If I were Stelios, and still interested in using the brand to launch other loco ventures, such as easyCruise, I'd certainly want to make sure it survived. The best way to do that, as said above, would be to take it away from the uncertainties of the public sector. All IMHO of course.

[fimbles]

easyJet PLC
07 July 2004


7 July 2004
easyJet passenger statistics for June 2004

Below are the easyJet passenger statistics for June 2004. This information is
published on the fifth working day of every month.

____________________________________________________________ _____________

Month ending June 2004 June 2003 Change
Passengers1 2,241,252 1,751,860 28%
Load Factor2 86% 86%
____________________________________________________________ _____________
Rolling 12 months ending June 2004 June 2003 Change
Passengers1 22,877,710 18,939,545 21%
Load Factor2 84% 84%
Revenue (unaudited)3 £1,030m £855m 21%
____________________________________________________________ _____________

Ray Webster, Chief Executive of easyJet said:

'These figures are in line with our statement in June. We continue to
capitalise on our market and financial strengths - last month we began new
services to Cologne, announced that we would base a further three new
aircraft at Berlin (bringing the total to nine) and added five new routes
from London Gatwick.'

1. Represents the number of earned seats flown. Earned seats include
seats that are flown whether or not the passenger turns up because
easyJet is a no-refund airline, and once a flight has departed a
no-show customer is generally not entitled to change flights or seek a
refund. Earned seats also include seats provided for promotional
purposes and to staff for business travel.

2. Represents the number of passengers as a proportion of the number of
seats available for passengers. No weighting of the load factor is
carried out to recognise the effect of varying flight (or 'stage')
lengths.

3. Represents statutory revenue (unaudited)

[Wizofoz]

Sell high, buy low, sell high perhaps??

[batninth]

ib16uk - One of the problems with going public is that the shareholders, especially the large institutions like pension funds, put expectations on the management of the company that may be at odds with what could work best. The execs end up trying to move forward with one hand tied behind their back as they have to show growth in margin, increased dividend etc often before they can look at positive inward investment (something that grows the company but may include an element of risk - such as opening up ops at a new airport).

One major problem with the shareholders is that they measure companies in a sector against each other usually by numbers. For example if SWA and Ryanair are showing aggressive cost control whereby their operating costs are x% of turnover, then shareholders may look at other airlines and expect the same everywhere without looking too deeply at the underlying factors. EJ may well run a newer fleet of aircraft which probably cost more in leasing than Ryanair - from a shareholder perspective thats not good news, yet from a passenger perspective I know which I would sooner travel on.

Also where execs have good ideas, they have to go back to the city to finance them. If Stelios is bring the company back into private ownership, a little lkike Branson did, then financing new ideas becomes easier (Stromin Norman has the right track there).

Personal perspective here is that a lot of organisations get more flexibility when privately owned than publicly. I suspect that if this happens then it could put EJ on a more competitive footing again.

[PAXboy]

Branson said that one of the reasons he was taking VS private again was that he was fed up of having to run off to the boys in the City to explain his every move and get their approval.

The stock market often makes the best profits for an individual when they invest for a prolonged period of time. New companies have to duck and dive (as batninth explains so well) and are less well suited to the Market. Mature companies can handle the Market better.

In the 1980s, the Thatcher/Reagan Axis managed to convince too many people that the Stock Markets were the way forward but thay are not universal and equal in their treatment of people and companies. The youngsters that are actually operating the market (analysts/stock brokers/jobbers etc.) only make money when the stock is moving. If people are buying and selling, then the folks in the middle make money. They do not care whether it is going up or down. In the process, thousands lose money and people's jobs are put at risk. In fact, many of the layoffs of PLCs are soley to appease the City.

So, whilst some folks may lose out on share options, others may gain in job security!

--------------------
"I tell you, we are here on Earth to fart around, and don't let anybody tell you any different." Kurt Vonnegut, Jr.

[Buster the Bear]

I understand that Mr Webster has stopped all plans to relocate easyJet HQ (easyLand) at Luton from the old domestic terminal and Portakabins, to a new site close to the old Vauxhall works.

This must save easy a few bob?
http://whipsnade.co.uk/picturelibrary/jpeg150/br/brown_bear_120_wide.jpg

[fiftyfour]

Easyjet are going to nead a lot of money over the next few years - new routes, new aircraft, training etc etc. Some of this was going to be paid for out of expected profits. These profits are now going to be less than expected. This is where the banks come in, because Easy will need to borrow/obtain guarantees etc. The city and the banks won't let Easy borrow more than a certain proportion of the 'value' of the company. If the shares are low, then the value of the company is low - less can be borrowed. A few hundred million in the bank is virtually meaningless. Take BA. BA a few years ago had £1 billion in the bank, and the city marked the shares at less than £1 each (a third of what they are now). BAs problem was £5 billion of outstanding loans, a £1 billion pension defict, no profits being made, and a dodgey future with war in Iraq etc. Things are looking up now - they make a profit and have only £4 billion debts, having sold off buildings etc. Cash in the bank is a small but important part of the equation. I have quite a large bank balance, but unfortunately I have a huge mortgage and it is possible that house prices might drop soon. Want to buy into my family?

If Easyjet were doing as well as some would like us to believe, the share price would be high, profits would be good and Stelious would not be selling blocks of shares whenever he can.

[FlapsOne]

Stelious would not be selling blocks of shares whenever he can.

Hence the rumour of his interest in buying back the company ???????????????????????????????????


Discuss?!?!?!

[Ben Evans]

Its unknown how much readers know about investing or the easyJet business plan.

At the moment the Discounted Cash Flow technique of valuing easyJet dictates a valuation of about 140p. The DCF tool is good when it come to mature companies with predictable income. But it falls down slightly when it comes to rapidly expanding companies in sectors experiencing unsustainable competition.

The growth will ease and much of the competition will go bust.

Thereby restoring share value to the levels seen at about the time of flotation. Namely 350p.

For investors with money to spare for 2 years 142p at presents excellent return potential. Spice it up with the prospect of Stelios taking it private for 202p then the share is tempting.

[no sig]

Right enough Ben when I think back it wasn't that long ago that BA was down at 96p vs, they are 2.50 odd at present.

easyJet is a very strong brand, delivering a good product with the critical mass to push further into Europe, their future either public or private is likely to be secure.

[Immelmann]

Maybe this statement is the only real posting in this thread:

From: Stelios Haji-Ioannou
9th of July, 2004 1740h

Recent reports in the press have claimed that I am considering (even "seriously" considering, according to one Italian paper) taking easyJet private, and I wish to clarify the position on this issue.

While taking easyJet private is "a possible option, but no decision has been made yet", as my office confirmed to a journalist a few days ago, frankly the media have read too much into this.

easyGroup and members of my family hold about 41% of the shares in easyJet. The easyJet share price has fallen substantially in recent months, for various reasons, as have other airline stocks. Like any large shareholder in any company we are very keen to protect our investments, and we keep our investment in easyJet under review. All sensible options are considered from time to time.

Taking easyJet private at this stage would, in my view, be something of an extreme measure. There are many other steps which could be considered before going private. For example I still have the contractual right to be Chairman of the Board of easyJet, a position I voluntarily stepped down from a couple of years ago and something I would only reclaim in extreme circumstances. Therefore, contrary to some press reports, it is not a job that I am after, it is about protecting shareholder value. My current view is clear having discussed it with both the Chairman and the Chief Executive of easyJet. I wish to work with and support the Board and senior management in order to protect and improve shareholder value and I believe the Board will be taking measures to achieve those ends. There is no current plan on the part of easyGroup and my family to take the Company private.

While we will continue to support the Board at this time, if there were a further deterioration in the share price, deviations from what we understand to be the Board's plans to improve shareholder value or other material changes in circumstances, we would obviously be free to take a different line.

[Nil further]

Bet that statement has spoiled Mr Websters weekend.
NF

[smallpilot]

Easyjet shares closed today at 143.50p down 6.50p (4.3%) My guess is you may see them fall further. Sounds like the crucial Summer period is not going to be a bumper one? Ther's an old city saying about profit-warnings coming in 3's - have we had 2 so far?
:(