EasyJet Agrees to Sweetened £5.5 Billion Takeover Proposal
Synopsis
The airline has endorsed an improved offer from private equity firm Castlelake, marking a major consolidation move in the European aviation market.
Key Highlights
- Castlelake offers to acquire easyJet for £5.5 billion ($7.3 billion).
- The bid values the airline at £6.90 in cash per share, 73% higher than where it closed on May 29.
- Castlelake has until August 3 to make a binding offer
British budget airline easyJet agreed in principle to a higher takeover bid from U.S. investment group Castlelake, setting the value of the carrier at £5.5 billion ($11.3 billion) and unveiling an emergency capital raise on Monday to safeguard against a longer-than-expected downturn caused by COVID-19. Should it be successful, the easyJet Castlelake takeover bid would take the airline private.
At £6.90 a share, the proposed offer values easyJet at a 73% premium to its closing share price on May 29, when Castlelake initially revealed interest in the No Frills airline. If a firm offer is made, the board said it would be “minded to recommend that shareholders accept” the revised proposal.
The deal may also change how easyJet is represented in the global aviation or Europe-focused ETFs held by Australian investors, while any hints of a longer-term shift at one of the larger low-cost airlines in Europe will be closely watched by travellers.
Board Signals Support
had dismissed Castlelake’s previous £4.93 billion offer in June, but agreed to grant the private equity firm limited access to its commercial information to allow talks to continue.
The $7.3 billion purchase is the latest for easyJet, which has split aircraft orders as airlines grapple with rising fuel prices and renewed profit pressures in the wake of tit-for-tat hostilities involving Iran. Rivalry with competitor Ryanair and its valuable airport landing slots have also kept the carrier in many a takeover target list over the years.
Castlelake has until August 3 to formally notify its intention to make an offer.
Still, EU ownership rules are an obstacle
Questions also remain over EU ownership rules, which mandate that EU airlines must be at least 50% owned and controlled by EU nationals, which is the basis for the proposed transaction.
The bidding vehicle would then be 49%-owned by Castlelake, with the remainder owned by former Malaysia Airlines CEO Peter Bellew and EU national aviation executive Mark Breen.
Established in 1995, easyJet has a fleet of 355 planes operating over 1200 routes in the rest of Europe. The airline’s package holidays branch and Airbus fleet have performed similarly well despite struggles up and down the industry.
Source: Reuters
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