RBC mulls over reports of EasyJet bid for Monarch

(ShareCast News) - EasyJet shares were flying higher on Monday following weekend press reports the budget airline is making a surprise takeover bid for rival Monarch.RBC Capital Markets Monarch's Gatwick slots would offer a potential opportunity for EasyJet if the company did not overpay."If EasyJet pursues Monarch to us this implies: (1) EasyJet's growth is more capital intensive than peers (i.e. expansion needs slots/businesses purchases as well as aircraft); and, (2) other non-margin dilutive organic growth opportunities might be becoming limited - or more contested."The Canadian bank said the main asset would be Monarch's 4-5% of Gatwick slots, usefully spread across the day.RBC noted unsubstantiated press reports suggest Vueling, HNA, or others might be planning a bid for the company, who will also see attraction in UK-Spain routes."We think in these circumstances we see a scenario where EasyJet may be forced to bid - and to pay high multiples to prevent competitors or blocks to its expansion to Gatwick."Still, RBC said: "We do not think acquiring a small airline resolves the wider market over supply risk issues or EasyJet's summer profit challenge."RBC rates EasyJet shares at 'underperform' with a 1,450p price target.At 1600 BST, EasyJet shares were up 1.5% to 1,468p.