EasyJet Shares Soar Over 13% on Superior Takeover Bid from Apollo

Shares of EasyJet (LSE:EZJ) surged more than 13% on Friday after the budget carrier announced it had agreed in principle to a takeover proposal from Apollo Global Management. The new offer has prompted EasyJet's board to withdraw its support for a previously accepted bid, setting the stage for a potential bidding war for the airline.

A Higher Offer Emerges

Apollo Global Management has proposed a cash offer of £7.15 per share, valuing the Luton-based airline at approximately £5.7 billion. In response to the new bid, EasyJet's stock price climbed to 666p.

In a statement, EasyJet said the Apollo offer delivers "a superior outcome for easyJet shareholders" compared to the previous proposal from Castlelake. The airline confirmed it was "no longer minded to recommend the Castlelake proposal" of £6.90 per share, which it had accepted in principle just days earlier.

Takeover Battle Heats Up

Apollo's offer represents a premium of 81% to EasyJet's closing share price of £3.94 on May 28, the last trading day before Castlelake's initial interest was made public. The new bid is also approximately 3.6% higher than Castlelake's latest offer.

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The agreement with Apollo is not yet a firm deal. Under takeover rules, Apollo has until 17:00 on August 7 to either announce a firm intention to make an offer or state that it will not do so. The development has investors pricing in a higher probability of a completed transaction, potentially at an even greater valuation if Castlelake returns with a counteroffer.

Context for Investors

The bidding contest for EasyJet comes at a challenging time for the aviation industry. The International Air Transport Association has warned that global airline profitability could be halved this year amid surging fuel costs, partly linked to geopolitical tensions.

Against this backdrop of sector-wide pressure, a cash takeover at a significant premium offers a certain exit for shareholders. The market's strong positive reaction reflects the appeal of this certainty and the potential for a bidding war to drive the final sale price higher.