US private equity firm Apollo has raised the stakes in the battle for easyJet, offering 715p per share, or £5.7bn, topping Castlelake's previous 690p offer. The move has sparked a competitive auction, providing relief to easyJet's board after weeks of negotiation with Castlelake.
Apollo's Offer Details
Apollo's 715p bid represents a 3.6% increase over Castlelake's offer. The approach included a direct appeal to founder Sir Stelios Haji-Ioannou, whose family holds a 15% stake and controls the "easy" brand licence. Apollo committed to continuing the brand agreement and boosting revenues, while Castlelake's plans remain less defined.
Market Implications
EasyJet's share price had been depressed, partly due to the Iran conflict affecting airline valuations. The bidding war underscores a trend of US raiders targeting undervalued London-listed companies. Both offers must comply with EU ownership rules requiring at least 50.1% regional ownership, but investors are confident a deal can be structured.
Chair Sir Stephen Hester is advised to secure a substantial break-fee in case EU regulators reject the legal workaround. An exit from the stock market appears likely, which is disappointing given easyJet's solid fundamentals: 208 owned aircraft, constrained supply, and valuable slots at Gatwick. The medium-term profit target of £1bn+ pre-tax, up from £665m last year, remains achievable.
Strategic Fit
Apollo stated it "believes in easyJet's existing strategy" and aims to accelerate it with additional capital. This suggests Apollo is willing to fund heavy capital expenditure for fleet renewal that stock market investors have been reluctant to support. Castlelake, a private credit fund with $38bn in assets, traditionally focuses on financing and leasing, making Apollo the stronger contender in owning and operating companies.
