EasyJet has reached a preliminary agreement for a £5.5 billion takeover by US private credit group Castlelake. The proposed deal includes a cash offer of £6.90 per share, which values EasyJet's equity around £5.5 billion. Shareholders will have the option to receive unlisted shares in the private entity. This agreement comes after EasyJet previously rejected four offers from Castlelake, stating they undervalued the airline. A deadline for Castlelake to make a firm offer has been extended to August 3. EasyJet aims to recover from pandemic losses and targeted its medium-term annual profit at £1 billion.

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EasyJet reaches outline agreement on £5.5bn takeover by Castlelake

UK airline’s board says it is minded to recommend proposal by US private credit group

An EasyJet passenger aircraft descends for landing as another EasyJet plane taxis on the runway at London Luton airport. Founded as a low-cost alternative to British Airways, easyJet’s network has grown to become one of the largest in Europe© Chris Ratcliffe/Bloomberg

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Peter Campbell and Camilla Hodgson in London

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EasyJet and Castlelake have come to a preliminary agreement on a £5.5bn takeover of the UK budget airline by the US private credit group.

The UK airline said in a statement on Sunday that the two companies had agreed in principle to financial terms that would take easyJet private if a firm offer was made by Castlelake and the deadline for a bid was extended to next month.

EasyJet said the agreement involved a cash offer by Castlelake of £6.90 a share, valuing the airline’s equity at about £5.5bn on a fully diluted basis. Shareholders will be able to choose to take unlisted shares as part of the deal, for those who wish to remain invested in the private group.

The airline added that the proposal from the private credit group was “at a value that the board would be minded to recommend” to its shareholders. EasyJet shares rose 11 per cent to £6.20 in early trading on Monday.

EasyJet’s shares fell after the start of the Iran war to as low as £3.69. Castlelake’s first rejected offer for the airline was at £5.60 per share.

The proposal to let investors move their holdings to the private company would allow Sir Stelios Haji-Ioannou, easyJet’s founder and largest shareholder, to hold on to his family’s 15 per cent stake. Haji-Ioannou has declined to comment so far on the takeover. He also has a deal that includes royalty payments based on the airline’s brand.

Rolling his stake into the private business would also make it easier for Castlelake to comply with EU ownership rules.

The announcement caps a dogged pursuit of easyJet by Castlelake, which has decades of experience leasing aircraft and also owns a large stake in Scandinavian airline SAS.

EasyJet rejected four previous offers from Castlelake as undervaluing the airline, but last month said it would enter talks as it sought a more attractive bid.

Under UK takeover rules, Castlelake had until Sunday at 5pm to make a firm offer or walk away but the deadline will now be extended until August 3.

In rejecting Castlelake’s earlier offers, easyJet called the approaches “highly opportunistic” and said the private credit group was seeking to buy the airline when its shares were depressed by the Iran war that has hit all carriers.

Castlelake’s fourth rejected offer was at £6.50 a share, valuing easyJet at £4.9bn.

Investors in easyJet previously told the FT they expected the airline’s board to engage with Castlelake at £7 a share.

Once Castlelake said it could raise its offer above £4.9bn if it had access to more financial information about easyJet, the airline agreed to co-operate to allow limited due diligence.

EasyJet said at the time that it had concerns about “ownership structure and deliverability” of Castlelake’s plan for the airline, but that it needed more details.

Founded as a low-cost alternative to British Airways, easyJet’s network has grown to become one of the largest in Europe.

EasyJet is seeking to make £1bn of annual profits in the medium term by expanding its holidays business with a new fleet of passenger jets that are more fuel efficient compared with previous ones.

The airline’s shares have failed to recover fully from the Covid-19 pandemic and have not traded above £7 since 2021.

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