The move, which values the airline at £7.15 per share, has secured the provisional backing of the easyJet board, setting the stage for a potential bidding war as both firms vie for control of the low-cost carrier.
The Bidding War for easyJet
The takeover battle began in late May when Castlelake, a Minneapolis-based investment firm with significant experience in aircraft financing, confirmed it was exploring a deal for the UK airline. According to reports, Castlelake had secured an outline for a £5.5bn acquisition. Apollo, which had been monitoring the company for months, moved to counter the offer three days after the Castlelake framework emerged.
Apollo’s proposal of £7.15 per share represents a premium of nearly 4 per cent over Castlelake’s previous bid. The offer has been well-received by the markets, with easyJet shares closing up 14.3 per cent at £6.72 in London following the announcement. While Castlelake has until August 3 to respond with a sixth bid, Apollo faces its own regulatory deadline of August 7 to formalize its offer under UK takeover rules.
Strategic Divergence Between Suitors
While both firms are experienced in aviation finance, their stated strategies for managing the airline differ. Apollo has publicly emphasized its intent to retain the current management team and scale the "easyJet holidays" division into a core earnings stream. The firm intends to keep the business intact rather than breaking it up, according to individuals familiar with the matter.
In contrast, Castlelake’s initial public statements focused heavily on the airline’s upcoming aircraft orders. While both firms have been linked to potential long-term exit strategies—such as a future sale to a larger European airline group or an initial public offering—Apollo’s pitch has specifically highlighted plans to improve brand quality and service levels through new loyalty programs and revenue management.
The Role of Sir Stelios Haji-Ioannou
A central figure in the acquisition process is easyJet founder and largest shareholder Sir Stelios Haji-Ioannou. Both suitors have engaged with the founder, whose blessing is considered vital for the successful completion of any deal. Haji-Ioannou holds a lucrative royalty agreement, receiving 0.25 per cent of the airline’s annual revenue, which last year amounted to £25mn.
Apollo has explicitly stated its intention to maintain this licensing agreement, signaling an attempt to secure the founder’s support. While Haji-Ioannou has not publicly endorsed either bidder, the alignment of his commercial interests remains a primary factor for both firms.
Regulatory and Ownership Hurdles
Both Apollo and Castlelake must navigate stringent European aviation regulations, which require that at least 51 per cent of the ownership and control of an airline be held by European nationals. The airline industry has faced significant economic upheaval in recent years, but renewed interest from private equity firms suggests a shift in how investors view the sector’s long-term profitability.
As the August deadlines approach, shareholders—including Magallanes Value Investors—continue to monitor the situation. While some investors argue the current bids still undervalue the company’s network of airport slots and fleet growth potential, the entry of a second bidder has increased the likelihood of a higher final valuation.
Key Takeaways
- Current Offer: Apollo’s bid of £7.15 per share values the airline at £5.7bn.
- Deadlines: Castlelake has until August 3 to submit a counter-offer; Apollo must formalize its bid by August 7.
- Management: Apollo has pledged to support the existing management team and expand the holidays business.
- Governance: Both bidders must ensure compliance with EU regulations requiring 51 per cent European ownership and control.