EasyJet Withdraws Support for Castlelake Offer as Apollo Swoops In with Superior GBP5.7 Billion Bid
Shares in easyJet (EZJ.L) surged 14% in early morning trading on Friday after its receipt of an indicative takeover offer of 5.7 billion pounds sterling from private equity firm Apollo Global Management.The British budget airline's board agreed in principle on the key financial terms of Apollo's offer of 7.15 pounds per share, saying it is at a level that could be recommended to shareholders. The proposal also gives shareholders the option to invest the consideration in the Apollo vehicle that will hold the company.The new deal came days after the airline finally agreed to recommend Castlelake's latest indicative proposal of 6.90 pounds per share, with a partial equity alternative. Following four consecutive rejections, easyJet finally agreed on the key financial terms of the fifth proposal and even facilitated an extension until Aug. 3 of the put-up-or-shut-up deadline for Castlelake.However, in light of the new Apollo offer, directors of the airline said they are no longer minded to recommend Castlelake's potential takeover offer, noting that Apollo's proposal presents a "superior outcome" for shareholders. They said Apollo's bid "offers an attractive combination of value, strategic alignment and long-term stewardship of the business."EasyJet's agreement with Apollo remains subject to various conditions, including the completion of due diligence. Apollo has until Aug. 7 to finalize its intention for the company."For the deal to make economic sense at this price, in our view easyJet must either execute a significant restructuring (more than tripling airline EBIT by 2030) or realize value from asset sales," Bernstein analysts said in a quick-take note following the announcement. "Apollo has a history of airline equity investment (Sun Country, Aeromexico) as well as debt and hybrid debt (SAS, LATAM, Air France-KLM).""In our view, this makes the restructuring path more credible - and Apollo similarly makes comments to the effect of belief in the strategy, supporting easyJet to further its business plan, and the delivery of long-term strategic objectives. However, we are not certain that this is assured over the medium-long term," Bernstein said.