EasyJet has moved a step closer to a potential £5.2 billion takeover after reaching an agreement in principle with US investment firm Castlelake, following weeks of negotiations.
The development marks a significant shift after the British low-cost airline rejected four earlier takeover proposals, accusing Castlelake of attempting to acquire the company at an undervalued price.
In a joint statement on Sunday, both parties confirmed they had reached an agreement in principle based on Castlelake’s latest proposal, submitted on July 4, valuing EasyJet at £6.90 per share.
Despite the breakthrough, the transaction is not yet complete.
Castlelake must still obtain the necessary regulatory approvals and satisfy other conditions before a formal takeover offer can proceed.
Under UK takeover rules, the investment firm has until 5:00 p.m. BST on August 3 to either announce a firm intention to make an offer or walk away from the deal.
If a formal bid is submitted, it will also require approval from EasyJet shareholders.
One of the biggest obstacles to the proposed acquisition is European Union ownership rules governing airlines.
As a European carrier, EasyJet must remain at least 51 per cent owned by European interests to retain its operating rights within the EU.
Castlelake, a US-based investment firm with $36 billion (£27.3 billion) in assets under management, has previously outlined plans aimed at complying with the ownership requirements if the acquisition proceeds.
EasyJet’s board indicated it is prepared to support the latest proposal if it becomes a formal offer.
The airline said the financial terms are at a level “that the Board would be minded to recommend to EasyJet shareholders.”
The offer represents a substantial premium to the airline’s recent market value. EasyJet shares closed at £5.58 on Friday, well below the proposed £6.90 per share.
Before reports of the initial takeover approach emerged in June, the airline’s stock had declined by more than 30 per cent over the previous year.
EasyJet had previously argued that its depressed share price did not reflect the company’s long-term value, attributing part of the decline to uncertainty in the travel sector following geopolitical tensions, including the conflict involving the United States, Israel and Iran.
The airline maintained that earlier bids significantly undervalued the business.
Headquartered in Luton, EasyJet is among Europe’s biggest budget airlines, employing more than 19,000 people and operating around 1,200 routes across 35 European countries.
Castlelake said it intends to support the airline’s long-term expansion if the acquisition succeeds.
According to EasyJet, the investment firm has expressed “tremendous respect” for the airline and its workforce and plans to back its continued growth and transformation into a stronger and more resilient European carrier.
The coming weeks are expected to determine whether the preliminary agreement develops into one of the biggest airline takeover deals in Europe in recent years.
