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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 per share. An easyJet spokesperson said the offer valued the airline’s equity at about £5.5bn on a fully diluted basis.
It added that the proposal from the private credit group was “at a value that the board would be minded to recommend” to its shareholders.
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 per 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 per 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 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 be 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 to previous ones.
The airline’s shares have failed to recover fully from the Covid pandemic and have not traded above £7 since 2021.
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