EasyJet bids under threat as EU to review airline ownership rules

(Sharecast News) - EasyJet tanked on Wednesday following a report the European Union is preparing a review of airline ownership rules to prevent foreign investors from gaining effective control of carriers - a move that could threaten US bids for the budget airline.

According to Reuters, citing an EU official, the EU review would "protect strategic autonomy" to ensure control of regional carriers remains within the bloc. It `comes as US investment firms Apollo Global Management and Castlelake are in a bidding war for easyJet.

"This is to ensure that foreign investors don't have full control," the official told Reuters. "We need to make sure we have sufficient headroom when it comes to control."

EasyJet announced earlier this month that it had agreed to be taken over by PE firm Apollo in a �5.7bn deal which trumped an earlier proposal by Castlelake.

Reuters suggested that if the deal went through, it could set an important precedent for European airlines, opening the door to private equity buyouts in a closely regulated industry where takeovers usually involve another carrier, often with government backing.

The official told Reuters `that the review - likely to take place in autumn - would look to clarify which kinds of corporate structures were allowed, especially around control and ownership. The official said that Apollo, Castlelake and easyJet had not spoken to the European regulators `about the details of their proposed deals.

"The concern is that the industry is on the wrong foot, `thinking that we no longer enforce the rules strictly. People will go down the wrong alley because there's a wrong perception," the official added.

At 1444 BST, easyJet shares were down 10.3% at 595.20p.