EasyJet has agreed to a takeover by Apollo in a £5.7 billion deal, kickstarting a bidding war for the UK airline which days ago accepted a bid from rival US suitor Castlelake.
Apollo's Offer Details
The Luton-based airline said it had reached an agreement in principle for an offer worth £7.15 per easyJet share. The offer values easyJet’s fully diluted share capital at about £5.7 billion and would be paid for with a combination of equity and debt.
This makes it bigger than the £6.90-a-share approach from rival US investment firm Castlelake, which easyJet had also agreed to in principle over the weekend. That offer had valued easyJet’s shares at £5.23 billion, or £5.5 billion on a fully diluted basis.
Bidding War Background
Private equity firm Apollo’s surprise approach follows five proposals from Castlelake, four of which easyJet rejected, claiming it was trying to buy the firm “on the cheap”. The latest offer appeared to satisfy easyJet’s board, prompting it to accept and recommend it be given the go-ahead by shareholders.
But on Friday, easyJet said Apollo’s offer “delivers a superior outcome” for its shareholders by providing a higher cash value, and the board was therefore “no longer minded to recommend the Castlelake proposal”.
Impact on UK Market
The low-cost carrier has become the centre of a bidding battle between the two investment firms who want to take it off the London Stock Exchange and into foreign ownership. If finalised, it will mark yet another overseas takeover for a UK company.
Apollo has built a sizeable portfolio of UK businesses following big acquisitions like parcel delivery company Evri for £2.7 billion and Wagamama owner The Restaurant Group for about £500 million. It is also part of a group of US and UK investment companies which effectively own Thames Water as its creditors.
Company and Founder
EasyJet was founded by Sir Stelios Haji-Ioannou in 1995 to offer a low-cost alternative to British Airways and it has since expanded to one of the largest networks across Europe. Sir Stelios is set to net a windfall from any sale because he still owns more than 15% of the firm, along with his family.
EasyJet said on Friday: “Apollo places a high value on people and believes that identifying and retaining key staff within the easyJet Group will be of paramount importance. Apollo also attaches great importance to the strength of the easyJet brand and intends that it will remain in use following completion of the proposed transaction.”
Next Steps
Apollo has until August 7 to make a formal offer for easyJet under City takeover rules.
