EasyJet Backs Apollo's £5.7B Bid, Sparking Potential Takeover Battle

A potential takeover battle for EasyJet PLC is intensifying after the British budget airline withdrew its support for an offer from Castlelake in favor of a superior proposal from Apollo Global Management. On Friday, EasyJet's board announced it had agreed in principle to a £5.7 billion ($7.65 billion) bid from the U.S. investment firm, setting the stage for a competitive bidding situation.

A Sudden Change of Course

The move marks a sharp reversal for EasyJet, which had just announced a deal in principle with aviation investor Castlelake on July 5. That agreement valued the airline at £5.5 billion, or £6.90 per share on a fully diluted basis.

In its latest statement, EasyJet confirmed it was withdrawing its recommendation for the Castlelake offer to support the higher bid from Apollo. The development follows a month of escalating offers for the carrier, which has been navigating a challenging market environment.

Market Reaction

Investors reacted positively to the news of a potential bidding war, which could drive the final acquisition price higher. According to a Reuters report, shares in EasyJet surged by as much as 15% following the announcement of Apollo's involvement.

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The takeover interest comes after a difficult period for the airline. EasyJet had previously warned of a larger first-half loss and noted that bookings were lagging behind the previous year, partly due to geopolitical conflict. The company had initially described the timing of Castlelake's first approach in late May as "highly opportunistic," citing its temporarily depressed share price.

The Bidding Timeline

The competition for EasyJet has escalated rapidly over the past six weeks. Key developments include:

• May 29: Minneapolis-based Castlelake first disclosed it was considering an offer.
• June: EasyJet rejected a series of private proposals from Castlelake, which increased its offer multiple times from £5.60 to £6.50 per share.
• July 5: EasyJet and Castlelake reached an agreement in principle on a £5.5 billion deal.
• July 10: EasyJet's board switched its allegiance to Apollo's higher £5.7 billion proposal.

The airline's founder, Stelios Haji-Ioannou, who has previously clashed with the board over company strategy, has declined to comment on the takeover approaches, as reported by Reuters.