The U.K. budget airline's board said it would be minded to recommend the 690 pence-per-share cash offer to shareholders
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EasyJet agreed in principle on Sunday to a £5.5 billion ($7.3 billion) cash offer from U.S. investment firm Castlelake, after the airline's board rejected four previous bids. Shares climbed roughly 10.5% when London markets opened Monday, reaching their highest point in the past year.
Priced at £6.90 per share, the bid is 73% above where easyJet's stock closed on May 29 — the date Castlelake first went public with its interest in acquiring the carrier, according to Reuters. EasyJet had turned down Castlelake's immediately preceding offer of £6.50 per share, making the accepted price roughly 6% higher than that rejected bid, according to Bloomberg.
In its Sunday statement, easyJet's board described the financial terms as "a value that the Board would be minded to recommend to easyJet shareholders," contingent on Castlelake formally declaring its intention to proceed and on all remaining terms being agreed. The deal includes a partial unlisted share alternative. The two sides set Aug. 3 at 5 p.m. London time as the deadline by which Castlelake must either commit to a formal offer or withdraw, the company said.
Even with the gains, easyJet's share price on Monday hovered around 614 pence — a notable gap below the 690 pence headline figure the board accepted in principle, according to MarketWatch. "There's still some doubts over ownership structure and regulatory approval, particularly with this deal potentially getting political attention with EasyJet being a well-known U.K. company," Bloomberg Intelligence analyst Conroy Gaynor told Bloomberg.
A central complication for the deal is an E.U. rule that airlines flying within the bloc must have more than half their ownership and effective control in the hands of E.U. citizens. As Quartz previously reported, Castlelake designed its proposed acquisition vehicle so that its own stake would be capped at 49%, with the remaining 51% held by E.U. nationals — aviation veterans Peter Bellew and Mark Breen. EasyJet had called that ownership structure "opaque."
The Minneapolis-based firm, which oversees roughly $37 billion in assets and counts approximately 200 airlines among its leasing clients, pledged to use "best endeavours" to secure any regulatory approvals required to close the deal, the company said. The firm said in a joint statement with easyJet that it intends to support the airline's fleet modernization program and its "future growth and transformation."
The bid comes as easyJet navigates a difficult operating environment. A profit warning came in April as fuel costs surged because of the Middle East conflict, and the airline subsequently posted a pretax loss when it reported first-half results, according to The Wall Street Journal.
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