EasyJet abruptly changed its mind by potential takeover candidates. The British low-cost carrier is now backing a higher all-cash offer from US private equity firm Apollo, replacing its earlier support for a rival proposal from Castlelake.
Apollo has proposed to acquire the low-cost carrier for £5.7 billion ($7.7 billion), valuing the airline at £7.15 ($9.65) per share. The offer exceeds Castlelake’s latest £5.5 billion ($7.4 billion) bid, which valued easyJet shares at £6.90 ($9.31).
The airline said its board had unanimously concluded that Apollo’s proposal was at a level it would be prepared to recommend to shareholders, reversing its previous position in favor of Castlelake.
“As a result, the board is no longer minded to recommend the Castlelake proposal,” easyJet said.
Apollo said it intends to support easyJet’s existing business strategy rather than pursue a breakup or major restructuring. The investment firm also pledged to retain the airline’s current leadership team and continue investing in fleet modernization, ancillary revenue, its loyalty program, and the expansion of easyJet Holidays.
The firm said it values the airline’s management and workforce and considers retaining key employees a priority if the acquisition proceeds.
One feature of Apollo’s proposal would allow existing shareholders to remain invested after the transaction, rather than requiring them to sell their holdings when the company is taken private.
That arrangement could appeal to easyJet founder Stelios Haji-Ioannou and his family, who together own more than 15% of the airline. Apollo also said it plans to maintain the existing licensing agreement under which Haji-Ioannou receives royalties for the easyJet brand.
If the founder chose to sell his stake under the proposed terms, it would be worth approximately £855 million ($1.15 billion). He has not publicly commented on either takeover approach.
Apollo has until August 7 to submit a formal offer. The company said it will take the necessary steps to comply with European Union ownership rules, which require EU airlines to remain majority-owned and controlled by European investors.
Investors welcomed the prospect of a bidding contest, sending easyJet shares up about 14% following the announcement. Analysts had previously suggested Castlelake’s offer undervalued the airline, making Apollo’s higher bid a more attractive proposition for shareholders.
