Apollo's 715p EasyJet Bid Forces Castlelake Into Higher-Offer Decision

EasyJet (EJTTF), a UK discount airline, has backed a surprise takeover offer from Apollo Global Management NYSE:APO, a US investment firm with aircraft leasing and airline financing interests, increasing pressure on Castlelake, a US investment firm that has already made five approaches for the carrier. Apollo's 715-pence-per-share proposal values EasyJet at 5.7 billion on a fully diluted basis, compared with Castlelake's latest 690-pence offer and 5.5 billion valuation. Castlelake now faces an Aug. 3 deadline to either withdraw or return with a higher bid, potentially pushing EasyJet's shares toward a price last recorded in early 2022.

Bernstein analysts estimate that EasyJet's aircraft, order book, holiday business, airport slots and other assets could be worth about 7.8 billion, or $10.5 billion, if valued separately. This figure exceeds both takeover proposals and may suggest that Castlelake and its partners could still identify value in making a sixth offer. EasyJet operates more than 360 Airbus, a European aircraft manufacturer, A320-family jets and has 277 aircraft on order with an estimated delivery value of $18.3 billion, giving the airline control over a valuable pipeline while Airbus and Boeing, a US aircraft manufacturer, face order backlogs extending into the 2030s.

EasyJet Holidays, the airline's vacation-package business, accounts for about one-fifth of total revenue and generated 61 million in pretax profit during the first six months of the year as customer numbers increased 22% from a year earlier. The airline also holds scarce landing rights at major constrained airports including London Gatwick, Geneva and Paris, adding another potentially valuable element to the takeover contest. Neither Apollo nor Castlelake has said it intends to break up EasyJet, although Bernstein analysts believe the airline's growth strategy would have a greater chance of continuing under Apollo, while Davy analyst Stephen Furlong expects Castlelake could maintain operations before eventually selling or relisting the company over the next decade.