The airline easyJet has said it intends to accept a £5.5bn takeover offer by the US investment firm Castlelake that would take Britain’s biggest low-cost carrier private.
The companies announced an agreement in principle on Sunday evening in a statement, and requested an extension to a deadline to complete the deal formally. The agreement came after weeks of negotiations and several rejected offers.
The airline, a member of Britain’s FTSE 250 index of mid-sized companies, said it was minded to accept an offer at £6.90 a share. If the deal completes, it could be worth nearly £800m for easyJet’s founder, Stelios Haji-Ioannou, who still owns more than 15% of the company along with his family.
EasyJet had rejected an offer of £6.50 a share 10 days earlier, saying it substantially undervalued the business. The first bid was worth £5.60 a share.
The company’s shares were priced at £5.58 when stock markets closed on Friday, giving it a market value of £4.2bn. The last time easyJet’s shares traded above £6.90 was in early 2022, during the coronavirus pandemic, however some easyJet shareholders had told its chair, the former Royal Bank of Scotland chief executive Stephen Hester, to push for a price above £7.
EasyJet had been deemed vulnerable to a takeover this year because of two profit warnings in the spring, and a difficult macroeconomic backdrop resulting from the fuel price surge caused by the US-Israeli war on Iran.
The airline’s chief executive, Kenton Jarvis, in March reported falling bookings because of the war.
It also faces stiff competition from the likes of the Irish carrier Ryanair, the biggest airline in Europe, Hungary’s Wizz Air and smaller British rival Jet2, which all operate in the low-cost market.
Castlelake, based in Minneapolis, Minnesota, is a US private equity investor founded by the American banker Rory O’Neill. The company specialises in asset-based lending, including leasing planes to airlines.
Some analysts have suggested that easyJet’s fleet could work with its leasing business, as well as potentially spinning off easyJet’s holidays arm. Castlelake has also previously had an interest in Scandinavian airline SAS. It is in the process of selling that stake, which it obtained via a debt restructuring, to Europe’s Air France-KLM.
EasyJet, headquartered at Luton airport north of London, operates from 164 airports in 38 countries, employing 19,000 people. The companies did not say what plans Castlelake had for its workers.
However, in the joint statement, Castlelake said it “has emphasised its tremendous respect for easyJet and its people, along with its intention to support its future growth and transformation to a stronger, more resilient European airline for the benefit of all stakeholders if the transaction proceeds to completion”.
Castlelake also said it was supportive of easyJet’s plans to buy newer planes to modernise its fleet and cut fuel costs.
The US investment firm has previously indicated it will set up a European holding company controlled by EU nationals in order to comply with EU restrictions on airlines. The controlling directors named in previous bids were Peter Bellew, a former Malaysia Airlines chief executive and former chief operating officer at easyJet, Riyadh Air and Ryanair, and Mark Breen, the chief executive of Dublin-based Oneiros Aerospace and a former chief operating officer at Oman Air.
The Canadian-American investor Brookfield Asset Management was also part of previous bids.
The investment bank Evercore advised easyJet on the negotiations, while Goldman Sachs advised Castlelake.
Castlelake has until 5pm on 3 August to make a firm offer or walk away.
