Apollo Offers to buy easyJet in US$5.7bn Takeover Deal

UK-based airline easyJet has agreed in principle to a US$5.7bn acquisition deal put forth by US firm Apollo Global Management.

The airline says Apollo’s offer delivered a “superior” outcome to investors than the previous bid for easyJet by Castlelake, a US investment firm. Prior to the agreed deal with Apollo, easyJet agreed in principle to the initial offer by Castlelake last week.

EasyJet says Apollo’s offer was worth £7.15 (US$9.57) per share, compared to the £6.90 (US$9.23) per share proposal offered by Castlelake.

In response to easyJet accepting the new offer, in a statement, Castlelake says it is “considering its options” in respect of the offer.

A resilient network and a growing holiday enterprise

Discussing the proposal, Susannah Streeter, Chief Investment Strategist at Wealth Club, says Apollo was interested in easyJet's business potential.

"While the carrier has been buffeted recently by higher fuel costs and geopolitical turbulence, it has built a resilient European network, a strong balance sheet and, crucially, a fast-growing holidays business. That's likely to be one of Apollo's biggest attractions, she says.

Susannah adds that things like package holidays currently generate higher margins and more predictable revenues than airline tickets alone.

"For passengers, it's very much business as usual for now, with flights, bookings and loyalty schemes unaffected while any deal works its way through the regulatory process,” she says.

Despite the potential of the deal, the agreement is not fully confirmed. Apollo has been set a deadline of 5pm on 7 August to either make a firm bid for easyJet or exit the deal. Castlelake’s deadline is 3 August.

Apollo’s bid comes after a series of offers made by Castlelake for easyJet, which originally accused the US firm of trying to takeover the airline “on the cheap”.

Despite this, easyJet says it reached an agreement in principle with Castlelake, with the US firm offering a potential US$5.2bn takeover deal.

Meeting European business regulations

One potential hurdle regarding the easyJet takeover is that European Union regulations stipulate that the airline must be majority-owned by EU citizens.

Castlelake initially proposed a partnership with two EU nationals – Peter Bellew, Managing Partner at Dooks Capital and Mark Breen, CEO of Oneiros Aerospace. 

Apollo has said it would take “all the necessary steps” to meet any EU conditions regarding the deal.

easyJet says the offer put forward by Apollo represented an 81% increase from its share price of £3.94 on 28 May, the last day of trading prior to when news of both takeover offers was made public.

Until the airline reached an agreement with Castlelake, easyJet had accused the US firm of being “opportunistic” with its bids, arguing that its lower share price had been “temporarily depressed” due to the impact of the Iran war on the travel industry.

Speaking on Apollo’s proposal, Dan Coatsworth, Head of Markets at AJ Bell, says “the bidding war now comes down to price” and that the “spotlight now turns back to [Castlelake]”, who will likely “dig even deeper to beat Apollo”.