London Quick Take - 10 July - EasyJet shares soar as Apollo gatecrashes takeover, stocks firmer as semis bounce, SK Hynix makes US debut

Gate crashed: EasyJet shares jumped +13% as Apollo Global Management crashed Castlelake’s party with a superior offer for the airline. Apollo cut in with a £5.7bn bid, offering £7.15 a share, above the £6.90 offered by Castlelake. Like Castlelake, Apollo is offering shareholders to retain their holdings in the private company. It’s also making all the necessary noises on complying with EU ownership rules. A bidding war is on; Castlelake could come back and we should not rule out a rival such as IAG or Air France-KLM coming in - I would favour a consolidation story (Europe's airlines remain way too fragmented) over a private equity story. It’s the latest twist in this story that’s seen easyJet rebuff four offers from Castlelake before agreeing to a fifth and improved offer on Sunday. I suggested on Wednesday that a rival could torpedo the deal and it hasn’t taken too long for this to happen. Apollo has until 7 August to submit a formal bid, but I wouldn’t be surprised if there’s more juice to be squeezed. For me this is a prime asset going for a song – if management think they can deliver £1bn in annual profit why take an offer for only five and a half times earnings? Either they don’t back themselves or think someone else can help do a better job? Prime take-off and landing slots, growth in higher margin holidays and an order book of shiny new Airbus aircraft make it very appealing...this should go for more, albeit the Iran war has underlined problems for the industry and the stock has never really recovered from the pandemic - shares haven’t traded above £7 since 2021 - and are yet to do so today despite the offer at £7.15p, last up 13% at £6.65p.

European stock markets opened broadly higher on Friday with gains of around +0.25% for the DAX and CAC early doors, while the FTSE 100 is also firmer by around +0.1%. It follows a rally yesterday for the Stoxx 600 that snapped a three-day losing streak as tech and miners rebounded. Meanwhile Vodafone shares surged +11% to the top of the FTSE 100 as French telecoms mogul Xavier Niel took a 16.2% stake in the company worth £4.4bn. He doesn't intend to make an offer but clearly there are thoughts leaning in this direction - the move in the shares suggest more than just a vote of confidence.

A recovery in chip stocks lifted Wall Street on Thursday though futures are mixed. The S&P 500 Index finished up 0.8%, Nasdaq 100 jumped +1.6%, and the Dow gained +0.3% as traders brushed off tensions in the Middle East and snapped up technology stocks. Semiconductor stocks rallied while Consumer Staple and Energy sector names lagged. AMD, Broadcom and Micron were among the leaders. Asian shares saw tech gains with the Kospi rallying after SK Hynix raised $26.5bn in its Nasdaq ADR debut, the largest-ever US first-time share sale by a foreign firm, selling 177.9m AI-linked ADRs at $149. 

Oil is down for a second day after retreating sharply yesterday with Brent back to a $75 handle, the 200-day moving average at $79 proving too much resistance for bulls without any serious further escalation in the Middle East. Technical talks continue and Washington says it’s committed to finding a solution despite the flare up in strikes this week.