EasyJet shares surged more than 10% in early trading on Monday after the budget airline reached an agreement in principle on a £5.5 billion takeover proposal from US investment firm Castlelake. The Luton-based carrier said on Sunday that the £6.90-a-share approach, the fifth from Castlelake, was at a value the board would be minded to recommend to shareholders should a formal offer be tabled.
Castlelake's Fifth Approach
Castlelake now has until 5pm on August 3 to make a firm bid or walk away under City takeover rules, after easyJet requested an extension of the offer deadline. The latest proposal values easyJet at £5.23 billion, or £5.5 billion on a fully diluted basis. Previous offers from Castlelake included £6.50 a share last month (valuing the firm at £4.93 billion), as well as earlier bids at £6.25, £6.00, and £5.60 a share.
EasyJet had previously rejected four proposals, claiming Castlelake was trying to buy the firm "on the cheap." However, on Sunday, easyJet said Castlelake had provided assurances to allay concerns over its acquisition plans, including a commitment to use "best endeavours" to obtain regulatory clearances and approvals.
Castlelake's Commitment
In a statement, easyJet said: "Castlelake has emphasised its tremendous respect for easyJet and its people, along with its intention to support its future growth and transformation to a stronger, more resilient European airline for the benefit of all stakeholders if the transaction proceeds to completion." Castlelake also expressed support for easyJet's fleet modernisation programme, which it regards as central to the company's long-term competitiveness, efficiency, and sustainability objectives.
A formal offer remains subject to customary pre-conditions, including due diligence and agreement on offer documents.
Market Reaction and Context
Chris Beauchamp, chief market analyst at IG, said: "Castlelake's pursuit of easyJet is ending the way we knew it would, the board having satisfied honour by getting the bidders to boost their original offer. While a decent premium to the lacklustre trading of recent years, it still represents a deep discount to the share price of the late 2010s, a sign of how in need easyJet is for someone to take the controls and plot a more successful flightpath."
If finalised, the takeover would mark another overseas acquisition of a UK company, following Tate & Lyle's £2.7 billion takeover by US-based Ingredion, William Hill owner Evoke's £243.1 million acquisition by Greek gambling firm Bally's Intralot, and London-listed Intertek's £9.5 billion buyout by Swedish investor EQT.
EasyJet's History and Outlook
EasyJet was founded by Sir Stelios Haji-Ioannou in 1995 and has grown into one of Europe's largest low-cost carriers. Sir Stelios and his family still own more than 15% of the firm and stand to net a windfall from any sale. The takeover comes as easyJet's share price has been pressured by concerns over the impact of geopolitical tensions on the airline sector. The FTSE 250 firm's shares had fallen around 30% in the past year before news of the bid interest, and the stock has not recovered to pre-Covid levels.
EasyJet has said it is focused on a target to deliver more than £1 billion in pre-tax profits in the medium term, with plans to expand its fast-growing package holidays arm. Castlelake, led by executive chairman and founder Rory O'Neill, has assets under management worth $36 billion (£27 billion). The firm entered talks in January with bankrupt US carrier Spirit Airlines over a possible takeover and previously bailed out collapsed Scandinavian Airlines (SAS), later selling its shares to Air France-KLM.
