The board of directors of the British low-cost airline EasyJet has agreed in principle to a $6.9 billion takeover by the U.S. investment firm Castlelake. If the transaction completes, the Haji-Ioannou family, who have long been the largest single shareholder in the Luton-based carrier, will lose control of the airline.
On Sunday, Castlelake and EasyJet published a joint statement with new details of the proposed deal.
Castlelake intends to pay £6.90 per share in cash to buy EasyJet outright. With around 747.5 million shares in circulation, the total cost to Castlelake is estimated at £5.15 billion. The proposed deal is subject to due diligence and acceptance by EasyJet’s existing shareholders.
Sunday’s deal was the fifth proposal put to the EasyJet board. Castlelake had previously offered £6.25 per share to buy the airline, but this was rejected on the grounds that the board considered EasyJet was worth more.
This proposal did, however, convince the board to partially open up its books to Castlelake to prove that the airline was worth a higher bid.
The Minneapolis-based ‘alternative investment firm’ first signalled its interest in EasyJet at the end of May, saying at the time that it was exploring a potential deal to take the airline private.
- On June 12, Castlelake initially proposed an offer to buy EasyJet’s 758 million shares at a price of £5.60 per share. The proposal was rejected days later on June 16.
- Castlelake returned just a day later to propose an offer price of £6.00 per share. EasyJet’s board rejected this proposal on June 20.
- Within hours, Castlelake said it would increase its offer price to £6.25 per share. The board rejected the deal but agreed to open up its books to Castlelake.
To get around EU antitrust rules on the ownership of European airlines by foreign entities, Castlelake has partnered with two aviation executives from Europe who would control an EU-based company that would assume a controlling stake in EasyJet. One of those executives is Irish citizen Peter Bellew, who was once the chief executive of Malaysian Airlines.
Bellew left Malaysian Airlines in 2017 and became the chief operations officer at EasyJet’s biggest rival, Ryanair. Bellew only lasted at Ryanair a couple of years, at which point it was announced that he intended to take on the same role at EasyJet.
What ensued was a major legal battle as Ryanair attempted to block Bellew’s move to EasyJet, arguing that he had signed a non-compete clause in his employment contract. Ultimately, Ryanair lost the court case, and Bellew moved to EasyJet.
Again, Bellew only lasted a couple of years before his sudden departure. His tenure had been marked by cabin crew and pilot unions accusing him of “misleading” investors and staff in efforts to reduce employee costs.
Castlelake was previously involved in the takeover of Scandinavian airline SAS as part of a joint bid with the Air France-KLM Group. Castlelake has since sold its stake in SAS.
The firm has also helped Virgin Atlantic refinance a slew of aircraft, and it owns an aviation asset management portfolio worth billions of dollars.
In a statement, Castlelake said it had “emphasised its tremendous respect for easyJet and its people, along with its intention to support its future growth and transformation to a stronger, more resilient European airline for the benefit of all stakeholders if the transaction proceeds to completion.”
The statement added: “Castlelake is supportive of easyJet’s fleet modernisation programme, which it regards as central to the Company’s long-term competitiveness, efficiency and sustainability objectives.”
EasyJet’s board of directors had initially described Castlelake’s interest in the airline as “opportunistic” as it came at a time that the airline’s share price was suppressed due to the conflict in the Middle East that has impacted airlines around the world.
Castlelake now has until August 3 to submit a formal bid for EasyJet.
