By Nina Kienle

Shares in easyJet jumped on Monday after the company said it accepted in principle a renewed bid by U.S. investment firm Castlelake, paving the way for a $7 billion takeover of the British budget airline.

The offer of 6.90 pounds a share gives easyJet an equity value of 5.23 billion pounds ($6.98 billion) rising to 5.52 billion pounds on a fully diluted basis. The bid is 24% above easyJet's closing price on Friday, and 73% above its closing price on May 29, when Castlelake first disclosed it was considering a bid.

Easyjet shares rose 10% in Monday morning's trading in London, hitting 6.16 pounds.

Easyjet had knocked back at least four previous approaches from Castlelake. Under the most recent offer, turned down as too low by the board, easyJet shareholders would have received 6.50 pounds a share. The fresh bid chimes with investor feedback on what would be considered an acceptable price, analysts at JPMorgan wrote in a note following the news.

While there can be no certainty that a firm offer will be made, easyJet's board has agreed to extend the deadline for the Minneapolis-based investor to make a firm offer until early next month, the two companies said in a joint statement Sunday.

The potential deal, the latest in a growing number of U.S. takeovers of U.K.-listed companies across a number of sectors, could give Castlelake ownership over a company best known for its Europe-focused low-cost airline, but one that is also building a package-vacation business. The company aims to reach more than 1 billion pounds a year in pretax profit in the medium term, from 665 million pounds for its last fiscal year.

Castlelake's courtship of the company comes at a time of turmoil in the airline industry. The outbreak this year of war in the Middle East has driven jet-fuel prices higher, disrupted air routes and weighed on travel demand.

Easyjet issued a profit warning in April, citing higher fuel costs linked to the conflict, and later reported a widened pretax loss for its fiscal first half.

Those headwinds had driven shares in easyJet down by some 22% since the start of the year, but the stock revived when Castlelake said in late May that it was in the early stages of considering a bid.

The airline initially called Castlelake's approach highly opportunistic, noting the depression in its share price, but later agreed to open its books to the suitor. The deal now looks likely to go ahead, analysts Stephen Furlong and Ava Costello at Davy Research wrote.

"This is a significant development in European aviation," they said.

Castlelake, which manages approximately $37 billion in assets, has aviation investments through its aircraft-leasing business. It previously participated in the restructuring of Scandinavian airline SAS, acquiring a 32% stake during bankruptcy proceedings in 2023 before later agreeing to sell the holding to Air France-KLM last year.

Write to Nina Kienle at nina.kienle@wsj.com