Apollo Global Management trumps Castlelake with £5.7 billion offer for easyJet

US-based investment firm Apollo Global Management announced on 10 July that it had tabled a £5.7 billion ($7.7 billion) bid for easyJet, trumping a ‌rival offer from Castlelake and initiating a potential bidding war for one of Europe’s largest low-cost airlines.

Upon receiving the previously unforeseen offer from Apollo, easyJet officials told Reuters that the airline would back the new bid, which offers £7.15 per ordinary share, edging above Castlelake’s £6.90 per share offer made on 4 July.

Without any other competing offers on the table at the time, the easyJet board had previously said that it would recommend the Castlelake offer to shareholders. Castlelake has yet to formally respond to Apollo’s counteroffer.    

According to analysts, the fact that the budget carrier is now facing a bidding war should come as no surprise. With a strong value proposition in the market, high customer satisfaction levels, a relatively modern fleet and a highly performing  in-house holiday division, easyJet’s future potential remains high, with a strong peak summer season approaching  

Shares in the carrier rose as much as 15% to £6.75 in early ​trading following the announcement by Apollo, reaching their highest level since February 2022. However, both competing offers are still pitched above this level, indicating that investors are yet to be convinced that the two US-based bidders can overcome ownership and control regulations for a European airline.       

An easyJet investor, who asked not to be used, told Reuters that it was “reassuring that multiple private investors can see the undervaluation in the shares that public investors have seen ​for some time”.

Will EU ownership regulations derail the competing bids?

The sticking point for both bids will be whether authorities in the UK and Europe can be convinced that control of easyJet will remain in local hands. Castlelake had previously said that it would take ownership of easyJet via two co-investors who would acquire 51% of the voting rights, with Castlelake retaining the remaining 49%.

The two co-investors have been identified as Peter Bellew, former easyJet COO and former Ryanair executive, and Mark Breen, CEO of Dublin-based Oneiros Aerospace. As both are EU nationals, Castlelake believes that this will satisfy the requirement that EU airlines be majority-owned and effectively controlled by EU nationals.

However, ownership alone is not enough. EU and UK aviation regulators look at “effective control”, which includes questions such as who appoints the majority of the board, who has the right to remove directors, who controls strategic decisions such as budgets, fleet purchases and route planning, and whether there are veto rights that allow a non-EU investor to exercise decisive influence despite owning less than 50%.

Deadlines on the horizon for the easyJet bids

Having stated an intention to bid for easyJet, Apollo now has until 7 August to announce a firm offer for the airline. Meanwhile, Castlelake has until August 3 to finalise its bid.

Apollo has said it plans to retain the easyJet brand by continuing the existing licensing agreement between easyJet ​and founder Stelios Haji-Ioannou’s easyGroup. The Haji-Ioannou family remains the airline’s largest shareholder with around 15% of the shares, while receiving a 0.25% royalty on easyJet’s revenue for use of the “easy” brand.