EasyJet shares surged on Friday, rising 13.2% to 666p after the Luton-based low-cost carrier said it had agreed in principle to a takeover proposal from Apollo Global Management valued at about £5.7 billion. Apollo's proposal would pay easyJet shareholders £7.15 in cash for each share.
The airline also announced it was "no longer minded to recommend the Castlelake proposal," reversing a recent position after previously having accepted Castlelake's in-principle offer of £6.90 per share. EasyJet described Apollo's approach as providing "a superior outcome for easyJet shareholders by providing a higher cash value than Castlelake's latest proposal of £6.90 per easyJet share."
Apollo's proposal is roughly 3.6% higher than Castlelake's most recent bid and could herald a bidding contest for the London-listed carrier. EasyJet noted that the Apollo offer equates to an 81% premium over the company's share price of £3.94 on May 28, which was the last trading day before Castlelake's interest became public.
That said, the agreement in principle does not amount to a binding transaction. Apollo has been given a deadline of 17:00 on August 7 to either submit a firm offer or withdraw its proposal.
The bid was lodged amid a strained environment for the global aviation sector. The article cites pressure on the industry from tighter jet fuel supplies in the wake of the U.S.-Iran conflict and notes a warning from the International Air Transport Association that global airline profitability is expected to halve this year as fuel bills rise.
Market conditions around the offer were modestly supportive: the wider UK market nudged higher as diplomatic engagements between Washington and Tehran eased some concerns about conflict in the Middle East, and major European indexes including Germany's DAX and France's CAC 40 also moved up marginally.
Market reaction and near-term outlook
The combination of a higher competing bid, a change in the board-endorsed recommendation, and a softening geopolitical backdrop drove easyJet shares to their highest level in more than a year. With both Apollo and Castlelake still in contention and firm-offer deadlines set for early August, investors are pricing in a greater chance that a deal will be completed and that the eventual offer could rise if the bidding escalates.
Summary of key figures cited
- EasyJet share price on the day of the announcement: 666p, up 13.2%.
- Apollo's proposed takeover valuation: approximately £5.7 billion; £7.15 per share in cash.
- Castlelake's prior in-principle offer: £6.90 per share.
- Apollo's offer relative to Castlelake's: about 3.6% higher.
- Premium over the May 28 share price of £3.94: 81%.
- Apollo's firm-bid deadline: 17:00 on August 7.