EasyJet has taken a significant step toward a possible takeover after reaching an agreement in principle with US investment firm Castlelake on a proposed acquisition valued at about £5.2 billion ($7.1 billion).
The airline’s board said it would be prepared to recommend the offer to shareholders if Castlelake submits a formal bid. The latest proposal values easyJet at £6.90 ($9.40) per share, an improvement on four earlier offers that the carrier rejected as undervaluing the business.
Castlelake, which manages funds holding about 2.14% of easyJet’s shares, had previously made bids ranging from £5.60 to £6.50 per share. The carrier had argued those proposals failed to reflect the airline’s long-term value and growth prospects.
The agreement does however not guarantee a takeover will proceed. Castlelake must still secure regulatory approvals and submit a firm offer before August 3. If it proceeds, the proposal will also require shareholder approval.
One of the biggest challenges remains European ownership rules. As an EU airline, easyJet must remain at least 51% owned and controlled by European interests to retain its operating rights across the region. Castlelake has previously outlined plans it believes would satisfy those requirements.
In a statement, easyJet said the proposed financial terms are at a level the board would be willing to recommend if a binding offer is made.
The airline also said Castlelake had expressed “tremendous respect” for easyJet, its employees and its future strategy, adding that the investor intends to support the carrier’s continued growth and transformation into a stronger and more resilient European airline.
easyJet is Europe’s second largest low-cost carrier, employing more than 19,000 people and operating approximately 1,200 routes across 35 European countries.
The airline has previously said its share price had been weighed down by broader geopolitical uncertainty, including the impact of tensions in the Middle East on travel demand. easyJet shares closed at £5.58 ($7.60) before the latest announcement, well below the new proposed offer price.
Castlelake manages approximately $36 billion in assets worldwide.
