Source: Sharecast
The budget airline announced on Monday that it was ready to accept a sweetened £5.5bn takeover offer from Castlelake after the private equity group tabled a fifth proposal at 690p a share.
However, it has now agreed in principle on the terms of a possible cash offer by Apollo at 715p per share. EasyJet said the offer from Apollo "delivers a superior outcome" for its shareholders.
The price offered by Apollo represents a premium of around 81% to the closing easyJet share price on 28 May, wich was the last business day before the start of the offer period relating to Castlelake.
As an alternative to the cash option, easyJet shareholders would have the opportunity to elect to roll their existing shareholding in the company into the vehicle through which the Apollo funds would hold their investment in the airline - the 'Stub Equity Alternative'.
EasyJet said the offer from Apollo offers "an attractive combination of value, strategic alignment and long-term stewardship of the business".
"Accordingly, the easyJet board is no longer minded to recommend the Castlelake proposal," it said.
Under UK takeover rules, Apollo has until 1700 BST on 7 August to either announce a firm offer or walk away.
Castlelake said in a very brief statement that it was "considering its options" and a further announcement will be made as and when appropriate.
At 1532 BST, easyJet shares were up 14.6% at 674.00p.
Neil Wilson, UK investor strategist at Saxo Markets, said: "A bidding war is on; Castlelake could come back and we should not rule out a rival such as IAG or Air France-KLM coming in - I would favour a consolidation story (Europe's airlines remain way too fragmented) over a private equity story. It’s the latest twist in this story that’s seen easyJet rebuff four offers from Castlelake before agreeing to a fifth and improved offer on Sunday.
"I suggested on Wednesday that a rival could torpedo the deal and it hasn’t taken too long for this to happen. Apollo has until 7 August to submit a formal bid, but I wouldn’t be surprised if there’s more juice to be squeezed. For me this is a prime asset going for a song - if management think they can deliver £1bn in annual profit why take an offer for only five and a half times earnings? Either they don’t back themselves or think someone else can help do a better job?
"Prime take-off and landing slots, growth in higher margin holidays and an order book of shiny new Airbus aircraft make it very appealing...this should go for more, albeit the Iran war has underlined problems for the industry and the stock has never really recovered from the pandemic - shares haven’t traded above £7 since 2021 - and are yet to do so today despite the offer at £7.15p, last up 13% at £6.65p."
Susannah Streeter, chief investment strategist at Wealth Club, said: "Apollo has caught the tailwind created by Castlelake's bid and has now powered ahead, overtaking its rival with a bazooka of an offer that's sent easyJet shares soaring again in trading today. Given the competing bids, the market clearly believes the airline is worth considerably more than where it was valued just a few weeks ago, before the takeover battle got off the runway.
"For Apollo, easyJet is an airline with the potential to reach a much higher altitude. While the carrier has been buffeted recently by higher fuel costs and geopolitical turbulence, it has built a resilient European network, a strong balance sheet and, crucially, a fast-growing holidays business. That's likely to be one of Apollo's biggest attractions. Package holidays generate higher margins and more predictable revenues than airline tickets alone, and Apollo is likely to believe there's plenty more value to unlock by expanding the business and making even more of the trusted easyJet brand."
See latest RNS on Investegate
