EasyJet shares soar after agreeing to £5.5bn Castlelake takeover

EasyJet is set to be sold for more than £5bn after agreeing "in principle" to an enhanced offer from Castlelake to take the low-cost airline private in the latest foreign-back raid of a UK-listed company.

After reviewing a fifth approach from the US private equity group management said they were “minded to recommend" the 690p-a-share offer. The winning bid was up from Castlelake’s previous 650p offer, which easyJet said undervalued the company. News of easyJet accepting the offer at 690p sent shares up 10% on Monday to 615p, with the stock the best performer on the FTSE 250 index.

Previous bids worth £5.60 a share, £6 a share, £6.25 share and then £6.50 a share were decried as “highly opportunistic” after the company's valuation compressed and shares tumbled in the wake of the Iran war to as low as 332p. EasyJet voiced concerns about "ownership structure and deliverability" of Castlelake's initial plans.

But the tone has shifted with the announcement on Sunday noting that Castlelake has “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”. Management also noted that Castlelake is “supportive of easyJet's fleet modernisation programme", which it regards as central to the company's long-term competitiveness and ambitions to drive fuel efficiency.

Under the terms of the deal shareholders will be able to take unlisted shares as part of the deal if they wish to remain invested in the private group.

The move to let shareholders retain holdings in the private company enables Sir Stelios Haji-Ioannou to retain his approximately 15% family stake in the airline which he founded. His continued involvement was seen as crucial to the success of the bid by Castlelake and will help ease the path for the US group to comply with European Union ownership rules.

Castlelake has long experience in leasing aircraft and owns a big stake in Scandinavian airline SAS, which it is currently in the process of offloading to Air France-KLM.

Under UK takeover rules, Castlelake has until 3 August to confirm the deal and table a firm offer. 

Shares of easyJet have struggled to recover since the pandemic and haven’t traded above £7 since 2021. However, the airline is hoping a fleet modernisation programme and push into its growing package holidays business will deliver £1bn in annual profits.

The takeover is a potential test of Andy Burnham's resolve amid growing concerns about UK companies being taken out by overseas raiders. It's yet another sign of UK plc being sold off on the cheap - other companies snapped up by foreign bidders recently include Tate & Lyle, Beazley, Schroders and William Hill owner Evoke.