easyJet reaches agreement in principle with Castlelake over £5 billion acquisition

Castlelake’s potential acquisition of easyJet

British low-cost airline easyJet has said it has reached an agreement in principle over a possible takeover by US private equity firm Castlelake, following an improved proposal valuing the business at more than £5 billion (€5.8 billion).

The easyJet board said Castlelake’s fifth approach, worth £6.90 per share, was one it “intends to recommend” to shareholders if a firm offer is made by 3 August, the deadline for completing the transaction.

Castlelake, which manages roughly $38 billion (€33 billion) in assets, largely within the aviation sector, had previously submitted four bids, all of which were rejected by easyJet, the budget airline recognised for its distinctive orange-and-white livery.

Previous bids and easyJet’s financial pressures

The airline was founded by entrepreneur Stelios Haji-Ioannou in the 1990s, as Europe’s low-cost airline market began to take off. It described Castlelake’s third proposal as “highly opportunistic”, as it came after a decline in its share price and a widening of company losses resulting from the Middle East war, which pushed up aviation fuel costs.

According to the Financial Times, Castlelake is a major aircraft leasing company with a fleet of 375 aircraft leased to airlines including Etihad, Qantas, Air India Express, Frontier and Viva. In 2023, Castlelake bought around 32% of Scandinavian airline SAS. That holding is currently being repurchased by Air France-KLM.

Although it turned down the initial approaches, easyJet opened the door to talks on 25 June, agreeing to give the US fund access to commercial information in the hope of securing a more attractive proposal.

Castlelake backs easyJet fleet modernisation

“Castlelake has emphasised its enormous respect for easyJet and its employees, as well as its intention to support its future growth and transformation into a stronger, more resilient European airline,” the company said in a statement issued on Sunday. “Castlelake supports easyJet’s fleet modernisation programme, which it considers central to the company’s long-term competitiveness, efficiency and sustainability objectives,” it added.

However, the statement cautioned that “there can be no certainty that any firm offer will be made” by the 3 August deadline, which was extended from Sunday.

In May, EasyJet reported a 27% increase in losses for the first half of its financial year, reaching £377 million (€440 million), owing to higher fuel prices and resulting changes to travel plans caused by the conflict between the US and Iran.

The company warned that the second half would also be affected, although chief executive Kenton Jarvis said the airline was “well positioned” to navigate the disruption.

Low-cost rival Ryanair, meanwhile, posted a 35% rise in profit in its annual results, although it too warned of future problems stemming from the Middle East war.