European low-cost carrier easyJet has agreed in principle to accept the latest offer from US investment firm Castlelake, after weeks of back-and-forth negotiations. This latest offer has a value of $7.3 billion (£5.2 billion). This comes after the Luton-based airline rejected four previous takeover offers.
Castlelake is no stranger to easyJet, already being a major shareholder with around 2.14% in shares of the airline through various funds that it manages. Castlelake is a Minneapolis-based global alternative investment firm with approximately $38 billion in assets through various investments around the world.
easyJet Agrees In Principle To The Latest Takeover Bid Worth $7.3 Billion
easyJet has driven a hard bargain, with previous takeover bids rejected as the airline accused Castlelake of wanting to buy it ‘on the cheap’. This Sunday, the airline finally accepted the latest offer, which in principle would be at a cost of $9.24 (£6.90) per share. At present, this does not mean that the deal is finalised; Castlelake will need to reach several regulatory clearances.
A key hurdle Castlelake will face is that European Union regulations restrict that airlines to being majority-owned by European citizens. Previous takeover bids initially included two EU nationals, including Peter Bellew (former COO at easyJet) and Mark Breen, who runs an aerospace consultancy.
Castlelake has until August 3 to announce if the firm will make an official offer or withdraw its interest, and once this is advised, the offer will be put to a shareholder vote for existing easyJet shareholders.
easyJet’s board noted that the proposed offer is at a cost that is at a value to the board that would ‘be minded to recommend to easyJet shareholders’, and that the airline is an attractive opportunity for Castlelake due to its brand recognition, substantial current fleet and order book, and aircraft slots at many major European airports including the likes of London Gatwick Airport (LGW) and Paris Charles De Gaulle Airport (CDG).
In an interview with the BBC, John Strickland, a former aviation executive, noted that easyJet is a ‘profitable, successful airline’, and that its strong position at airports across Europe means that its slots alone are worth ‘tens of millions of pounds’. While it would be hoped that the airline sale would not see these slots traded, it is also unexpected that Castlelake would want to slim down the airline’s operations.
Castlelake has emphasized that it respects easyJet and its people, with the intention of future growth and transformation to ensure it remains a strong, resilient airline in Europe.
The debate is centered on valuation, aviation assets, and whether a higher bid could emerge.
In Europe, easyJet is one of the continent’s largest airlines and operates more than 350 aircraft across 1,200 routes to 35 countries. It employs more than 19,000 staff and is a major operator at the following airports:
easyJet operates with several subsidiaries for its operations, including easyJet UK, easyJet Europe, and easyJet Switzerland. easyJet Holidays also supports the airline’s ability to sell package holidays including hotels, car hire, and transfers. It is headquartered on the grounds of London Luton Airport (LTN) in Bedfordshire.
The airline is a low-cost carrier, and like Ryanair, the carrier follows the business model of Southwest Airlines. The airline sells point-to-point flights, and there are additional costs for checked baggage, meals onboard, priority boarding, and seat selection. This model also focuses on high aircraft utilization, including quick turnaround times.
Castlelake’s latest takeover bid is the latest chapter in the airline’s history, and should it proceed, this will see the investment firm commit to the airline’s current growth strategy, including fleet modernization. Political scrutiny and regulatory hurdles are yet to come, so there are quite a few requirements that the investor will have to work through until the takeover is completed in full.
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