Apollo outbids Castlelake: Easyjet accepts £5.7 billion takeover offer

Under UK takeover law, Apollo must now submit a binding offer for Easyjet by 7 August. Castlelake has until 3 August to do so. Both sides therefore find themselves in a tight window in which they can make their respective offers binding.

Easyjet shares jumped 13.5 percent after the start of trading in London, to 668 pence. In the takeover tussle, Easyjet shares have gained around 70 percent since mid-May, most recently reaching 588 pence. The news of the surprisingly accepted offer alone triggered a sharp price surge.

Deadlines and bidding contest

Apollo stated that the company believes in Easyjet's existing strategy and wants to further develop and strengthen the low-cost airline's business model. In doing so, the financial investor is signalling its intention to stick with the airline's current course.

Easyjet was founded in 1995 by the British-Cypriot entrepreneur Stelios Haji-Ioannou, who, together with his family, still holds around 15 percent of the shares. The airline has long been regarded as a takeover target because of its valuable takeoff and landing rights at airports such as London Gatwick, Paris and Geneva. These slots are scarce and in demand because they secure operations on profitable routes.

Easyjet also faces stiff competition from rival Ryanair. The industry worldwide is grappling with high fuel costs and margin pressure as a result of the Iran conflict. Against this backdrop, Easyjet's takeoff and landing rights are gaining additional strategic significance.

Market reaction

With the acceptance of Apollo's offer, Easyjet is heading towards a change of ownership. Observers see the move as a sign that the airline's board is prioritising the higher price and the associated security for shareholders. The final decision now depends on the outcome of the ongoing deadlines.

Should Apollo submit a binding offer by 7 August as planned, the transaction would be set in motion in the following weeks. Should Castlelake, however, follow suit, a further bidding contest for the British low-cost carrier would be conceivable. Industry circles expect Castlelake to use the remaining deadline to table a revised offer.

Easyjet shares are listed in London; the company is traded on the London Stock Exchange. With Friday's price surge, the shares are continuing their upward trend since mid-May. Market participants see this as a sign of the ongoing takeover speculation surrounding the airline.

Valuable slots as strategic core

Easyjet's board is expected to comment again in the coming days as soon as one of the two offers is on the table in binding form. Until then, the situation remains tense: both bidders are courting the long-established low-cost carrier, one of Europe's largest low-cost providers, with great determination.

With Apollo Global, a heavyweight of the US financial world is entering the fray. Apollo is known as a financial investor and has in the past acquired and further developed companies outside the aviation sector. In the case of Easyjet, the company is explicitly positioning itself as a supporter of the existing strategy.

Castlelake is likewise a US investor and had only recently made its first approach to Easyjet. The fact that Easyjet's leadership opted for the Apollo variant after the weekend amounts to a U-turn and came as a surprise to the market.

Industry environment and competition

The next steps are clearly defined: Castlelake must submit a binding offer by 3 August or step aside; Apollo has until 7 August. Both deadlines run under UK takeover law, which is designed to ensure fair proceedings and transparent offers for shareholders.

Meanwhile, Easyjet's employees and customers are waiting for signals regarding the future direction. Neither Apollo nor Castlelake has so far provided any information on possible changes to the route network, the fleet or personnel policy. Until the conclusion of a possible sale process, the existing business strategy is likely to be continued.