NYTimes.com Article: EasyJet Says It Is Considering Acquisition of a Rival, Go Fly

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EasyJet Says It Is Considering Acquisition of a Rival, Go Fly

May 4, 2002

By SUZANNE KAPNER




LONDON, May 3 - EasyJet said today that it was in advanced
negotiations to buy Go Fly, a rival low-cost airline, from
the venture capital firm that owns it, the 3i Group.

The deal would give EasyJet the largest fleet of any
low-cost carrier in Europe, surpassing the current leader,
Ryanair. Buzz and Virgin Express would be distant third and
fourth players, analysts said.

The talks surprised some analysts, who said they had not
expected consolidation in what is still a young and
fast-growing part of the transportation industry. With 3i
determined to cash out of its investment, EasyJet is taking
advantage of an unusual opportunity to buy a rival, they
said.

3i, which bought Go Fly from British Airways in June, had
been planning to exit the investment by taking the airline
public. But with the stock markets still uncertain, selling
outright to a strategic buyer seemed a surer route,
analysts said.

"By buying Go, EasyJet would clarify the market as having
two major players only," said Christopher Avery of J. P.
Morgan Chase in London. He said he did not expect a wave of
consolidation: "Europe is big enough for all of the budget
airlines to grow over the next 10 years."

EasyJet said it made its announcement today because it had
"become aware of a leak" in the negotiations. Its stock
rose 4.7 percent in London to close at £4.72 ($6.91) a
share.

Mr. Avery said he would expect EasyJet to pay roughly £400
million ($587 million) for Go Fly - almost four times what
3i paid British Airways for the carrier last spring. The
fortunes of budget airlines have improved markedly since
then, compared with traditional airlines.

Even after Sept. 11, when the major airlines were trimming
route maps and cutting costs, the budget carriers reported
steady increases in traffic. Both EasyJet and Ryanair have
ordered new planes recently to keep up with demand.

Analysts said that combining Go Fly and EasyJet made
strategic sense. EasyJet would expand its presence in
France and Italy, where it would gain airport slots in
Milan, Naples, Rome and Venice, and benefit from adding Go
Fly's established hub at Stansted Airport to its own
operations at Gatwick and Luton.

http://www.nytimes.com/2002/05/04/business/04AIR.html?ex=1021524426&ei=1&en=7b872d316df0a024



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