EasyJet has received a higher £5.7 billion takeover offer from U.S. private equity firm Apollo Global Management, raising the prospect of a bidding war only days after the budget carrier said it was prepared to accept a rival proposal from Castlelake, another U.S. investment firm.
Apollo is offering £7.15 per share in cash, prompting EasyJet to withdraw its support for Castlelake's earlier £6.90 per-share proposal. The board had agreed to accept that offer "in principle" earlier this week after rejecting four previous bids from Castlelake.
In a statement to investors on Friday, EasyJet said Apollo's proposal offered "an attractive combination of value, strategic alignment and long-term stewardship of the business" and confirmed it was "no longer minded" to recommend Castlelake's rival offer.
The Apollo bid marks the latest development in a month-long takeover process. Castlelake had increased its offer five times before EasyJet agreed to due diligence talks and granted access to its financial information. The firm could still return with a higher bid.
Castlelake's proposed structure would have given the firm a 49 percent stake in EasyJet, with the remaining 51 percent controlled by EU nationals, including former airline executives Peter Bellew and Mark Breen. This structure would be necessary to comply with EU rules on the majority ownership of airlines.
Apollo, meanwhile, plans to give eligible EasyJet shareholders the option to roll their existing shares into the investment vehicle through which Apollo Funds would hold its stake in the airline. EasyJet said the terms of any such investment remain subject to further discussion and agreement.
The airline also sought to reassure employees and investors that Apollo does not intend to break up the business.
In its Friday statement, the carrier said Apollo believes that "EasyJet management's operational and commercial ambitions can be substantially accelerated via the access to incremental capital and longer-term business and strategic planning that a private company setting affords".
It added that "Apollo places a high value on people and believes that identifying and retaining key staff within the EasyJet Group will be of paramount importance".
EasyJet stated there was "no certainty that any firm offer will be made" by Apollo and advised its shareholders to "take no action" at this stage.