EasyJet has agreed in principle to a takeover offer from US investment firm Castlelake, valuing the budget airline at around £5.2 billion. The proposal, made on July 4, offers £6.90 per share, a price the EasyJet board would be inclined to recommend to shareholders if a firm offer is made. This latest bid is the fifth consecutive offer from Castlelake, which previously held about a 2.14% stake in EasyJet and had earlier bids at £6.50, £6, £6.25, and £5.60 per share. Castlelake has until August 3 to announce a firm intention to make an offer. The agreed-upon price represents a 73% premium to EasyJet's closing price on May 29, when takeover interest was first disclosed, and a 24% premium to its closing price on the Friday prior to the agreement.
The deal faces considerable regulatory hurdles, particularly regarding European Union regulations that require EU airlines to be majority-owned and controlled by EU citizens. Castlelake, a US firm, plans to address this by partnering with two EU nationals, Peter Bellew and Mark Breen, who would establish an EU-based company to hold a majority stake in the airline. Peter Bellew is a former EasyJet Chief Operating Officer and CEO of Malaysia Airlines. Analysts have raised questions about how this ownership structure will satisfy EU rules and governance. Furthermore, the transaction requires regulatory clearances and final approval through a shareholder vote. Founder Stelios Haji-Ioannou, who retains a roughly 15% stake, could prove influential, with the deal potentially providing him with a substantial windfall of up to $800 million.
Despite the agreement in principle, analysts caution that the deal is far from certain. JPMorgan analysts highlighted concerns about meeting EU ownership rules and establishing an acceptable governance structure. Castlelake has committed to using its "best endeavors" to secure the necessary regulatory approvals. EasyJet's shares had fallen over 30% in the year preceding the initial bid news in June, and the airline had previously rejected Castlelake's advances as "opportunistic" amid market volatility partly due to the Iran conflict. The private nature of the potential acquisition could allow Castlelake to focus on improving efficiency and operational aspects, possibly leading to changes in EasyJet's strategic direction or even unbundling its aircraft leasing operations.
