EasyJet shares surged nearly 10% on Monday after the Luton-based airline finally agreed a takeover deal with US investment firm Castlelake – at the fifth attempt. The no-frills carrier, which employs more than 19,000 people and flies 1,200 routes across 35 European countries, had previously rejected four offers from Castlelake, accusing the US firm of trying to buy it "on the cheap".
But on Sunday, the two sides announced an agreement in principle on a proposal worth about £5.2bn, or £6.90 per share. EasyJet's board said the financial terms were "at a value that the Board would be minded to recommend" to shareholders, should Castlelake table a formal bid. The US firm, which already owns a 2.14% stake through the funds it manages, now has until 17:00 BST on 3 August to either announce a firm intention to make an offer or walk away.
“EasyJet agrees to £5.2bn takeover by US firm Castlelake after rejecting four lower bids, sending shares up nearly 10%.”
One significant hurdle remains: European Union regulations require EasyJet to be majority-owned by EU citizens. Castlelake has addressed this by proposing a partnership with two EU nationals – Peter Bellew, a former EasyJet chief operating officer, and Mark Breen, an aerospace consultant – who would own an EU-based company with majority control of the airline.
Industry analysts said the deal underscored a worrying trend of UK companies being snapped up by foreign buyers at knockdown prices. Kathleen Brooks, research director at brokerage XTB, said "an iconic British aviation name" would fall into US hands. "This deal is symbolic, as it suggests a lack of stock market growth, and persistent underperformance of UK equities means that there is a massive for sale sign above UK corporates," she said. Garry White, chief investment commentator at Charles Stanley, added: "It is clear UK companies are currently being sold off on the cheap."
Former aviation executive John Strickland told the BBC that apart from being a "profitable, successful airline", EasyJet had high brand recognition, a fleet of over 350 planes, a massive order book, and strong slot positions at congested airports such as Gatwick and Paris Charles de Gaulle. He said he did not expect Castlelake to slim down the airline.
Castlelake has indicated it supports EasyJet's current strategy and fleet modernisation programme, and will allow existing shareholders to remain invested rather than forcing them to sell if the deal proceeds. That leaves a potential windfall for the airline's founder, Stelios Haji-Ioannou, who along with his family owns about 15% of the company – some 116m shares. City analysts estimate he could net an £800m payday if he chooses to sell.