Shares in easyJet PLC (LSE:EZJ) flew 5.5% higher to 569p, around a year's high, after it rejected a fourth takeover proposal from Castlelake but agreed to let the US private equity firm take a look at its books.
The low-cost airline said the San Francisco firm stated that it "hopes to be able to further improve its value following access to limited commercial information".
The latest proposal, priced at 650p a share, was received on Tuesday and compares to the deal worth 625p that Castlelake took public on Monday. It includes a partial alternative allowing investors to receive unlisted, non-transferable and non-voting shares in the acquisition vehicle instead of cash.
This new price is a sizeable premium to the 392.4p 'undisturbed' price from the end of May, but only around 10% above highs seen last summer.
Castlelake later issued a separate statement saying it "welcomes the easyJet board's constructive engagement".
The bidding vehicle would be owned 49% by Castlelake and co-investors including Brookfield Asset Management (TSX:BAM, NYSE:BAM), with the remaining 51% held by EU nationals, including Peter Bellew, a former easyJet and Ryanair executive, and Mark Breen, an aviation investor.
However, easyJet's board said it "continues to regard the fourth proposal as substantially undervaluing the company and its prospects and continuing to give rise to significant questions of deliverability".
It reiterated concerns about the proposed ownership structure, the time required to satisfy regulatory and other conditions, and the effect that delay could have on the value of any offer
Directors previously said they see Castlelake as trying to buy the airline "on the cheap" after its shares were hit by issues stemming from the Iran war, pointing to profit increasing 46% in the past two years and a medium-term target to generate at least £1 billion of profit.
The UK Takeover Panel has agreed to extend Castlelake's put-up-or-shut-up deadline by nine days to 5 July for it to announce a firm offer or walk away.
The shares sank to a four-year low in March and April, when the company revealed that as the war in Iran had ramped up jet fuel costs and made booking patterns more uncertain, resulting in a likely widening of first-half losses.
Analyst Chris Beauchamp at IG said "the deadline extension has been taken as a sign that some kind of deal is doable. Investors clearly expect a sweetened deal to come through, which accounts for the continued strength in the shares over the past week."
** UPDATE: Adds share price, details, broker comment **
