The board of EasyJet has switched allegiance in a surprise bidding war, agreeing in principle to a £5.7bn all-cash takeover from US private equity giant Apollo Global Management – just days after backing a rival offer.
Apollo’s proposal, worth £7.15 per share, trumped the £6.90 per share bid from Castlelake that EasyJet had also agreed to in principle at the weekend. The low-cost carrier said Apollo’s offer delivered “a superior outcome” to investors, and that it was “no longer minded” to accept the Castlelake deal.
“EasyJet board favours Apollo's £5.7bn cash bid, ditching earlier Castlelake offer in surprise bidding war.”
“The easyJet board has carefully considered the proposed cash offer together with its financial advisers and has unanimously concluded that the financial terms of the proposed cash offer are at a level that it would be minded to recommend to easyJet shareholders,” the company said.
Castlelake, in a short statement, said it noted the announcement and was “considering its options in respect of its possible offer”. The US investment firm had already raised its proposal five times before being beaten.
Apollo signalled it would back EasyJet’s existing strategy and management, and was not looking to break up the company. “Apollo believes in easyJet’s existing strategy of evolving and strengthening the low-cost carrier model, most notably through upgrading the fleet, enhancing the ancillary and loyalty offering, and scaling holidays into a structurally differentiated earnings stream,” the US company said.
For founder Sir Stelios Haji-Ioannou, who with his family still owns about 15% of the airline, the Apollo bid could mean an £855m payday if he sells. But the deal also allows current shareholders to remain invested rather than being forced to cash out when EasyJet delists. Apollo intends to keep Sir Stelios’s brand licence agreement in place.
Analysts said EasyJet’s appeal lies in its profitability, fleet, and prized airport slots at Gatwick and Paris Charles de Gaulle. Susannah Streeter, chief investment strategist at Wealth Club, noted that despite higher fuel costs and geopolitical turbulence, EasyJet had built “a resilient European network, a strong balance sheet and, crucially, a fast-growing holidays business”.
“Package holidays generate higher margins and more predictable revenues than airline tickets alone,” she added. For passengers, she said it was “business as usual for now, with flights, bookings and loyalty schemes unaffected while any deal works its way through the regulatory process”.
But Conroy Gaynor, senior consumer analyst at Bloomberg Intelligence, warned that the need to improve margins meant lower fares were unlikely. While Apollo had “more explicitly” backed EasyJet’s growth model, “the need to improve the airline margin suggests any success in lowering costs won’t necessary translate to lower fares”, he said.
Apollo has been set a deadline of 17:00 on 7 August to make a firm bid or walk away. Castlelake’s deadline to make a firm offer is 3 August. The saga began when EasyJet first agreed to a Castlelake bid after a series of offers.