EasyJet wants to buy £500m Go

Robert Lea12 April 2012

EASYJET shocked the stock market today with the news that it is trying to buy its budget airline rival, Go. The deal would create Europe's biggest no-frills airline, leapfrogging market leader Ryanair. It could value Stansted-based Go at as much as £500m, City sources said.

But the link-up could spell bad news for consumers, as the cut-throat price war between Ryanair, easyJet and Go has seen air fares to Britain and Europe tumble, to the point where the carriers in certain promotions are almost giving tickets away.

In a statement to the stock market easyJet, which is still run by Greek entrepreneur Stelios Haji-Ioannou despite recent news of his intention to step back from the airline, said it is keen to 'significantly' expand its activities.

'In this context easyJet announces it is in exclusive negotiations with 3i Group and Go regarding the possible acquisition,' it said, and confirmed that negotiations 'are at an advanced stage'.

The deal would bring windfalls for venture capital group 3i - which has 67.5% of Go - and Barclays, which has 10%. They financed the £110m management buy-out of the airline from former parent British Airways.

A sale would also see substantial gains for many of Go's senior staff who between them own 22.5% of the company. Go's boss Barbara Cassani, recently voted businesswoman of the year, could get as much as £20m. EasyJet carries around 8.3m passengers a year, while Go has carried around 4.1m in the last year. This compares to Ryanair which in the last 12 months has carried around 11m.

A merged easyJet-Go would have 56 Boeing 737s compared to Ryanair's fleet of 44, with another 100 on order over the next decade.

Go was said today to be close to putting in an order for 75 new midsize Airbus aircraft, although that deal is now obviously on ice. EasyJet itself has said it needs to acquire another 75 aircraft.

In its statement, easyJet confirmed its intention 'only to conclude these negotiations if it believes that the acquisition would be in the interests of shareholders, customers and staff'.

EasyJet is valued on the stock market at £1.5 billion. Its shares leapt 21p to 472p on the announcement.

A spokeswoman for 3i said the talks had been going on for 'a couple of months' but there was no immediate sign of an early agreement. The talks were between the two airlines direct and did not involve 3i, she added.

She said there was no pressure from 3i to realise the investment in Go. 'We feel it is an excellent business and it has been trading well.'

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