Apollo’s £5.7 Billion Takeover and What it Means For easyJet Shareholders

The tug-of-war over easyJet is over, at least for now. Apollo Global Management has won the bidding for easyJet, agreeing to buy the airline for about £5.7 billion. Castlelake, another private equity firm that was also interested, pulled out of the running.

The decision came after Castlelake withdrew from the bidding without giving a specific reason, ending the prospect of a drawn-out bidding war.

What’s In the Deal and Market Reaction

Apollo’s offer values easyJet shares at £7.15 each, which is 81% higher than the share price before takeover talks began in late May. Castlelake had made several offers, with its last one being £6.90 per share, or £5.5 billion. Apollo’s higher bid ultimately won out.

The easyJet board unanimously recommended Apollo’s offer. They believe it provides shareholders with immediate, guaranteed value. This is seen as less risky than easyJet continuing as a public company.

Crucially, founder Stelios Haji-Ioannou and his family, who own about 15.3% of easyJet, have also agreed to the deal, which removes a potential obstacle.

What It Means for the Company and easyJet Stock

Apollo isn’t planning a radical overhaul for EasyJet. Instead, it aims to accelerate the airline’s current strategy. That means focusing on faster fleet upgrades to larger, more efficient aircraft, expanding ancillary and loyalty revenues, and growing the holidays business.

Private ownership should give management more flexibility. They’ll have more room for long-term capital allocation and commercial partnerships, including potential feeding arrangements with long-haul carriers.

On paper, the deal seems straightforward for shareholders, even if the market hasn’t fully priced in its certainty. easyJet shares closed at 671p on Friday, still a good bit below Apollo’s 715p offer.

This gap is typical in live takeovers. It accounts for the time value of money while the deal goes through approvals, plus a buffer for any remaining risk that could still derail it. As the process nears completion, that difference should shrink, assuming no unexpected issues pop up.

Navigating Regulatory Hurdles and Ownership Structure

Taking a large European airline private is complicated because of foreign ownership rules. Airlines need to be majority-owned and controlled by UK or EU nationals to keep their operating licenses. To meet these requirements, Apollo has structured the ownership so that its funds will own no more than 49.9%.

A European trust will hold up to 5%, and Stelios Haji-Ioannou along with other shareholders who roll over their investment will hold between 45.1% and 49.9% of the new private company. This setup aims to keep operations running smoothly while satisfying regulators.

What Happens Next and What to Watch

This agreement isn’t the end of the road. It takes the deal from a handshake agreement to a solid offer under the UK Takeover Code. However, EasyJet shareholders still have to vote on the plan, and regulatory bodies need to approve it before everything can be finalized.

Investors should expect the share price to keep drifting toward the offer level as those milestones are cleared, punctuated by volatility around any regulatory news or shareholder vote updates.

For current easyJet shareholders, the immediate situation is straightforward. Unless the deal falls apart, the stock will probably act as a reflection of the takeover’s completion risk, rather than being influenced by normal airline business, until the deal is done.