EasyJet’s board has signaled it is “minded to recommend” a potential £5.7bn all-cash takeover bid from US private equity firm Apollo. The move marks a shift away from a competing £5.5bn proposal from Castlelake, which the board had initially accepted in principle. The Apollo offer values the airline at £7.15p a share, triggering a 14% rise in easyJet’s stock price on Friday morning.
The Shift from Castlelake to Apollo
The decision to pivot toward Apollo follows competition between private equity suitors. According to the company, the board reviewed the Castlelake proposal—which had been raised five times to reach a £6.90 deal—and analysts said it undervalued the business. By choosing the £7.15p a share offer from Apollo, the board has effectively ended its support for the Castlelake deal.
If the £5.7bn deal proceeds, easyJet founder Stelios Haji-Ioannou, who holds more than 15% of the company along with his family, could receive an £855m payout if he chooses to sell his stake.
Strategy and Operational Continuity
Apollo has indicated it intends to maintain easyJet’s existing strategy rather than breaking up the airline. The private equity firm stated it supports the carrier’s focus on fleet upgrades, the expansion of holidays into a structurally differentiated earnings stream, and the enhancement of loyalty and ancillary offerings. Furthermore, Apollo plans to retain the current management team and honor the existing brand license agreement with Haji-Ioannou, which provides him with ongoing royalty payments.
Apollo’s aviation portfolio already includes investments in Sun Country Airlines, Aeroméxico, Atlas Air, and Swissport. Additionally, the firm has a history of providing liquidity to major carriers, including €2.5bn in financing to Air France-KLM during the Covid-19 pandemic and a $700m injection for Scandinavian Airlines in 2022.
Regulatory Hurdles in Aviation Ownership
A primary challenge for any non-EU buyer is the regulation regarding airline ownership. European rules mandate that airlines must remain majority-owned by investors within the region, a requirement that remains in effect for easyJet post-Brexit. Apollo has committed to taking “all necessary steps” to satisfy these regulatory conditions.
Castlelake had previously attempted to navigate these rules by partnering with Peter Bellew, former chief operating officer at Ryanair, easyJet and Riyadh Air, and Mark Breen, CEO of Oneiros Aerospace. Apollo has until August 7 to formalize its bid, at which point the company must confirm its strategy for meeting regional ownership thresholds.
Pro Tip: Tracking Bidding Wars
Investors often look for “go-shop” periods or extended offer deadlines in airline acquisitions. These windows allow for competing bids, which can drive up share prices as firms like Apollo and Castlelake test the board’s valuation limits.
Frequently Asked Questions
- Why did easyJet switch from Castlelake to Apollo? Analysts concluded the Castlelake offer undervalued the company. Apollo’s offer of £7.15p a share provides a higher financial return for shareholders.
- Will the airline’s management change? Apollo has stated it intends to back the current management team and strategy, specifically highlighting the importance of retaining key staff.
- How does the EU ownership rule affect this bid? EU law requires airlines to be majority-owned by EU-based investors. Any buyer must ensure the airline maintains this structure to continue operating its current routes.
- What is the deadline for the final offer? Apollo has until August 7 to submit a firm offer for the airline.
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