Apollo Global Management Secures Dominant Position in easyJet Acquisition Race
A Substantial Cash Offer Reshapes the Takeover Landscape
Apollo hijacks easyJet takeover with 5 7bn – easyJet announced on Friday that it has reached an agreement in principle with Apollo Global Management regarding a cash proposal valued at £7.15 per share. This comprehensive offer amounts to approximately £5.7 billion, equivalent to €6.6 billion, and has been characterized by the airline’s board as representing a “superior outcome” for shareholders compared to the competing bid from Castlelake. The American private equity firm had previously presented an offer of £6.90 per share, which easyJet had accepted only the previous Sunday. Despite this recent acceptance, the Luton-headquartered carrier indicated it was “no longer minded to recommend” the Castlelake proposal.
Market participants responded enthusiastically to the developing auction scenario. easyJet shares appreciated by approximately 15% during Friday morning trading, reaching roughly £6.75 per share. This price level marks the highest valuation for the airline’s stock since early 2022. Nevertheless, the current share price remains somewhat below Apollo’s offered amount. The proposed acquisition represents an impressive 81% premium over the £3.94 closing price recorded on May 28, which constituted the final trading day before Castlelake’s interest became publicly known. This valuation underscores how significantly the airline’s market value had declined prior to the emergence of takeover speculation.
Financial Headwinds and Operational Challenges
Several external factors have contributed to easyJet’s recent financial difficulties. Geopolitical tensions between the United States and Iran triggered substantial increases in jet fuel prices while simultaneously disrupting travel arrangements across multiple routes. These combined pressures caused easyJet’s shares to lose more than a third of their value before the takeover interest materialized. During May, the airline disclosed a headline loss after tax of £377 million (€442 million) for the six-month period ending in March. This loss represents a 27% deterioration compared to the same period a year earlier, despite revenue growth of 12% reaching £3.95 billion (€4.6 billion).
The airline cautioned that the second half of the financial year would experience additional pressure from elevated fuel expenses and diminished visibility regarding future bookings. However, Chief Executive Kenton Jarvis expressed confidence that easyJet was “well placed” to navigate through these challenging conditions. The broader aviation sector faces similar difficulties, with the International Air Transport Association issuing a warning last month that global airline profits are projected to decrease by half during the current year.
Regulatory Considerations and Strategic Commitments
Both potential acquirers must navigate a significant regulatory obstacle embedded within European Union legislation. EU law mandates that airlines operating flights within the bloc must be majority-owned and effectively controlled by EU member states or qualifying European nationals. Castlelake intended to address this requirement by forming a partnership with two Irish aviation executives, Peter Bellew and Mark Breen. Through this arrangement, these executives would maintain a controlling stake via an EU-based corporate entity.
Concern regarding such regulatory complexities helps explain why easyJet’s shares have consistently traded below the bid prices being offered. Apollo has committed to taking “all necessary steps” to secure merger clearance and obtain any approvals connected to the EU’s Foreign Subsidies Regulation. Additionally, Apollo has pledged to preserve the easyJet brand name by extending the current license agreement with easyGroup, the holding vehicle established by founder Sir Stelios Haji-Ioannou. Sir Stelios and his family collectively own approximately 15% of the airline and receive a royalty payment based on the carrier’s revenue. This commitment to maintaining the brand may prove particularly influential in securing support from the airline’s most significant shareholder, especially since neither offer has yet become definitive.
Timeline and Market Implications
Under British takeover regulations, Castlelake must make a final decision by August 3 regarding whether to proceed with its bid or withdraw entirely. Apollo faces a slightly later deadline of August 7. Should either transaction successfully conclude, easyJet would depart from the London Stock Exchange, becoming part of the most recent wave of British enterprises acquired by international investors during this year.
