The bidding war for easyJet has officially come to an end after US firm Apollo Global put in a £5.7 billion ($7.7 billion) bid for the British airline. This offer topped rival investment firm Castlelake’s £5.2 billion proposal that was previously agreed to ‘in principle’ by easyJet at the beginning of July. Founder of easyJet, Stelios Haji-Ioannou, has backed Apollo’s bid alongside Castlelake’s official withdrawal from consideration, drawing the takeover bidding to a close.
Apollo’s Successful Takeover Bid
Despite the tentative agreement reached between easyJet and Castlelake, Apollo Global has secured the takeover of one of Europe’s largest low-budget airlines after making a higher offer.
The British airline employs more than 19,000 people and flies to over 30 countries across Europe and North Africa. It was founded in 1995 by Sir Stelios Haji-Ioannou with the aim of creating more affordable flying options for travelers. The airline is based in London Luton Airport (LTN).
The previous agreement between easyJet and Castlelake rested on a £5.2 billion offer from the American investment firm, however it had previously made four earlier bids for the airline that were all rejected by easyJet prior to Apollo’s higher offer that was made in July.
Non-Executive Chair of easyJet Stephen Hester commented on the offer, saying:
“While we remain confident in the strength of our business and the opportunities ahead, we believe this offer appropriately recognises the quality of the business we have built and delivers immediate, certain and attractive value for shareholders.”
Apollo Global is a US-based firm that currently managed over $1 trillion in assets and has previous experience in the aviation industry, having invested in other airlines such as Sun Country Airlines, Aeromexico, and Atlas Air. Apollo has said it plans to accelerate easyJet’s commercial ambitions, particularly its fast-growing holiday business, now that it is under private ownership.
The firm has also confirmed it has no plans to cut any jobs in the first 12 months following the takeover of easyJet. Passengers can expect largely the same service.
Ownership of easyJet
Though Apollo’s successful bid marks an end of uncertainty over the budget airline’s future, questions have been raised over the specifications of Apollo’s takeover of the airline considering its current flying rights dependence on European interests.
Investors and regulators have expressed concern over how Apollo will comply with European Union rules on airline ownership, given Apollo is an American company, and easyJet is required to be majority owned and controlled by EU interests in order to maintain its flying rights.
Apollo has said it anticipated dealing with this stipulation by ensuring that EU-based shareholders alongside the Haji-Ioannou family will hold ownership of around half of the airline. An EU management trust will also hold up to 5% of the business; Apollo will hold control up to 49.9% of the airline.
Stelios Haji-Ionannou made a statement about the end of the bidding war over easyJet:
“Having carefully reviewed the proposal by Apollo, my family members and I have decided to support the recommended acquisition announced by the easyJet board. […] I am pleased with Apollo’s strategic intentions for the easyJet business, which aim to create more growth.”
He also his intentions to remain involved in the company clear, stating:
“My family and I intend to remain invested as long-term major shareholders of easyJet for the next chapter in the company’s journey.”
Privatisation May Protect easyJet’s Value
Financial analysts have commented that privatisation of the company may actually protect easyJet’s assets in the long run from the fallout of the war in Iran.
The sector is expected to be significantly hit by increasing costs of jet fuel, which will also likely begin to be reflected in air fares. The deal with Apollo may protect easyJet from some of this turbulence, as well as provide the airline with better funds and leasing agreements.
The takeover from Apollo sets to see easyJet shareholders receive £7.15 per share. This marks a major endorsement in the airline after a period of notable price decline to lows of less than £4 due to surging fuel prices following the Iran war.
Whilst this is a significant improvement for easyJet, analysts have noted that the figure still does not reach the airline’s peak asset values from pre-pandemic years.
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