EasyJet shares surged more than 10% in early Monday trading after the airline agreed in principle to a £5.5 billion takeover by American investment firm Castlelake. The Luton-based carrier announced on Sunday that the £6.90-per-share approach, the fifth from the US suitor, was at a value the board would be minded to recommend to shareholders should a formal offer be made.
Details of the Bid
The latest offer values easyJet at £5.23 billion, or £5.5 billion on a fully diluted basis. Castlelake now has until 5pm on 3 August to lodge a firm bid or withdraw under City takeover rules, after easyJet requested an extension to the offer deadline. The airline had previously rebuffed four earlier approaches, with the most recent at £6.50 a share valuing the business at £4.93 billion. Earlier proposals were pitched at £6.25, £5.60, and £6 a share respectively.
Board's Recommendation and Guarantees
Until now, easyJet had resisted Castlelake's overtures, asserting the firm was attempting to acquire the company "on the cheap." However, on Sunday, easyJet announced that Castlelake had provided certain guarantees to address its reservations. The airline stated: "In connection with the fifth proposal, Castlelake has confirmed that it would agree to a 'best endeavours' commitment in any cooperation agreement to obtain any regulatory clearances and approvals required to consummate the transaction."
Castlelake has emphasized its respect for easyJet and its people, along with its intention to support future growth and transformation into a stronger, more resilient European airline. The firm is supportive of easyJet's fleet modernisation programme, which it regards as central to long-term competitiveness, efficiency, and sustainability objectives.
Market Reaction and Analyst Views
Chris Beauchamp, chief market analyst at IG, said: "Castlelake's pursuit of easyJet is ending the way we knew it would, the board having satisfied honour by getting the bidders to boost their original offer. While a decent premium to the lacklustre trading of recent years, it still represents a deep discount to the share price of the late 2010s, a sign of how in need easyJet is for someone to take the controls and plot a more successful flightpath."
Background and Impact
EasyJet was founded by Sir Stelios Haji-Ioannou in 1995 as a budget alternative to British Airways and has grown into one of Europe's largest airline networks. Sir Stelios, who still holds more than 15% of the company alongside his family, stands to pocket a substantial windfall should the sale go ahead. The takeover speculation comes at a turbulent time, with the airline's share price having been dragged down by concerns over the impact of the Iran war on the aviation sector. Shares in the FTSE 250 carrier had shed around 30% of their value over the past year prior to the bid interest, with the stock yet to reclaim pre-Covid pandemic heights.
Castlelake's Profile
Castlelake, led by executive chairman and founder Rory O'Neill, manages assets worth $36 billion (£27 billion). The firm entered negotiations in January with bankrupt American carrier Spirit Airlines regarding a potential acquisition and has previously rescued collapsed Scandinavian Airlines (SAS) before offloading its stake to Air France-KLM.
Should the deal be completed, it would represent another overseas acquisition of a UK business, following Tate & Lyle's recent £2.7 billion buyout by US rival Ingredion, William Hill owner Evoke's £243.1 million purchase by Greek gambling group Bally's Intralot, and London-listed Intertek's £9.5 billion acquisition by Swedish investor EQT.
