Apollo Global Management has agreed to acquire budget airline EasyJet for £5.7bn, outbidding rival asset manager Castlelake in a surprise move that could trigger a bidding war between the two US investors.
Apollo's Superior Offer
EasyJet announced on Friday that it was prepared to accept an all-cash proposal from Apollo valuing the airline at 714p per share. This surpasses the 690p per share offer from Castlelake received just days earlier. The proposal represents an 80% premium on EasyJet's closing share price before Castlelake's interest emerged last month.
The carrier stated that Apollo's offer "delivers a superior outcome for EasyJet shareholders," adding that the proposal from one of the world's largest asset managers represents "an attractive combination of value, strategic alignment and long-term stewardship of the business." Accordingly, the EasyJet board is no longer minded to recommend the Castlelake proposal.
Market Reaction and Delisting
EasyJet shares climbed more than 14% in early trading following the announcement. Any transaction will see the orange-liveried carrier exit the London Stock Exchange, making it among several major FTSE 100 firms to leave the market this year. City favourites Schroders and Beazley have both accepted proposals from overseas rivals, while Swedish buyout giant EQT successfully bid for London-listed Intertek in a transaction valuing the testing giant at £11bn.
Castlelake's Initial Approach
Castlelake's interest in EasyJet first came to light last month when the American alternative investment firm, which manages approximately $38bn (£28.3bn) in assets, launched an unexpected takeover bid initially valuing the airline at £4.7bn. The approach was swiftly rebuffed by EasyJet's board, which dismissed the buyout firm's opening gambit as "opportunistic." Castlelake responded with a series of improved proposals before shareholders pressured the aviation giant to accept a £5.2bn offer last week.
Apollo's Aviation Portfolio
Should Apollo's counter-bid prove successful, EasyJet would become part of the investment behemoth's expanding aviation portfolio. Apollo already holds a partial stake in Atlas Air and Modern Aviation, while its private credit division extended a $745m loan to Virgin Atlantic last year.
Impact of Iran Conflict
Prior to the wave of private equity attention, EasyJet's valuation had plummeted in the wake of the Iran conflict. The price of jet fuel more than doubled in the immediate aftermath of the opening wave of strikes, sending the carrier's shares tumbling by more than a third before Castlelake's interest first came to light.
