No-frills airline EasyJet has agreed in principle to a £5.7bn takeover proposal from US firm Apollo Global Management – just days after accepting a rival offer, triggering a dramatic bidding war for one of Europe's largest carriers.
The carrier said Apollo's offer of £7.15 per share delivered "a superior outcome" to investors compared with the £6.90 per share bid from US investment firm Castlelake, which EasyJet had also agreed to in principle at the weekend and was now "no longer minded" to accept.
“EasyJet agrees £5.7bn takeover from Apollo, trumping Castlelake's £6.90 per share offer.”
The U-turn comes after Castlelake had made a series of offers for EasyJet, which employs more than 19,000 people and flies around 1,200 routes across 35 European countries. Founded by Sir Stelios Haji-Ioannou in 1995 to offer cheap air fares to Europe, the airline – together with carriers such as Ryanair – has transformed UK air travel. Sir Stelios and the Haji-Ioannou family still own about a 15% stake.
Analysts say EasyJet is an attractive target because it is profitable, has a large fleet of aircraft, and holds valuable take-off and landing slots at major airports such as Gatwick and Paris Charles de Gaulle – the most popular of which can be worth tens of millions of pounds when traded between airlines.
"While the carrier has been buffeted recently by higher fuel costs and geopolitical turbulence, it has built a resilient European network, a strong balance sheet and, crucially, a fast-growing holidays business," said Susannah Streeter, chief investment strategist at Wealth Club. "That's likely to be one of Apollo's biggest attractions. Package holidays generate higher margins and more predictable revenues than airline tickets alone."
But Conroy Gaynor, senior consumer analyst at Bloomberg Intelligence, warned that while Apollo has "more explicitly" backed EasyJet's growth model, "the need to improve the airline margin suggests any success in lowering costs won't necessarily translate to lower fares".
The latest statement does not mean a deal has been confirmed. Apollo has been set a deadline of 17:00 on 7 August to either make a firm bid or walk away, while Castlelake's deadline to make a firm offer is 3 August. Castlelake said it noted the statement and was "considering its options in respect of its possible offer".
For passengers, Streeter said it was "very much business as usual for now, with flights, bookings and loyalty schemes unaffected while any deal works its way through the regulatory process".
With two suitors circling and deadlines looming, the battle for control of EasyJet is far from over.