EasyJet reaches agreement in principle to planned takeover worth up to £5.5bn from Castlelake
EasyJet is set to become the latest British company to fall into foreign hands after reaching an agreement in principle to a proposed takeover worth up to £5.5 billion from US suitor Castlelake.
The Luton-based carrier said on Sunday the £6.90-a-share approach, the fifth from the US investment firm, was “at a value that the board would be minded to recommend to easyJet shareholders” should a formal offer be tabled.
Castlelake now has until 5pm on August 3 to make a firm bid for easyJet or walk away under City takeover rules after easyJet requested for the offer deadline to be extended.
Shares in easyJet jumped more than 10% in early trading on Monday as the firm looks set to finally succumb following a determined pursuit from the private credit company.
If finalised, it will mark yet another overseas takeover for a UK company, following Tate & Lyle’s recent £2.7 billion takeover by US-based competitor Ingredion, as well as William Hill owner Evoke’s £243.1 million acquisition by Greek gambling firm Bally’s Intralot and London-listed Intertek’s £9.5 billion buyout by Swedish investor EQT. EasyJet has rejected four previous proposals from Castlelake, with the most recent approach at £6.50 a share last month, valuing the firm at £4.93 billion. Castlelake’s previous proposals were worth £6.25 a share and £5.60 a share and £6 a share. The latest is worth £5.23 billion, or £5.5 billion on a fully diluted basis.
Until now, easyJet has batted away Castlelake’s interest, claiming it was trying to buy the firm “on the cheap”.
But on Sunday, easyJet said Castlelake had given some assurances to allay easyJet’s concerns over its acquisition plans.
EasyJet said: “In connection with the fifth proposal, Castlelake has confirmed that it would agree to a ‘best endeavours’ commitment in any cooperation agreement to obtain any regulatory clearances and approvals required to consummate the transaction.
“In discussions between the parties, Castlelake has emphasised its tremendous respect for easyJet and its people, along with its intention to support its future growth and transformation to a stronger, more resilient European airline for the benefit of all stakeholders if the transaction proceeds to completion.
“Castlelake is supportive of easyJet’s fleet modernisation programme, which it regards as central to the Company’s long-term competitiveness, efficiency and sustainability objectives.”
A formal offer is now subject to “customary pre-conditions”, such as due diligence and the agreement of offer documents, easyJet said.
Chris Beauchamp, chief market analyst at investing and trading platform IG, said: “Castlelake’s pursuit of easyJet is ending the way we knew it would, the board having satisfied honour by getting the bidders to boost their original offer. While a decent premium to the lacklustre trading of recent years, it still represents a deep discount to the share price of the late 2010s, a sign of how in need easyJet is for someone to take the controls and plot a more successful flightpath.”