European budget airline easyJet has reached an agreement "in
principle" to be acquired by U.S. investment firm Castlelake in a £5.5
billion deal.
Having rejected four previous bids from Castlelake,
easyJet's board said this week it had "reached an
agreement in principle on the key financial terms" following an improved
offer from Castlelake of £6.90 per share—up from its previous offer in late June of £6.50 per share.
In
a statement to investors, easyJet said that its board "would be minded" to recommend Castlelake's latest offer to shareholders if the
investment firm goes ahead with the takeover.
In discussions
between the parties, "Castlelake has emphasized 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 for the benefit of all stakeholders if the transaction proceeds
to completion," added the airline.
"Castlelake is supportive of
easyJet's fleet modernization program, which it regards as central to
the company's long-term competitiveness, efficiency and sustainability
objectives.”
The proposed deal could face significant regulatory and approval
challenges. Castlelake is proposing a bidding vehicle for easyJet that
would be 49 percent owned by Castlelake, with the other 51 per cent
controlled by EU nationals, including experienced airline executives
Peter Bellew and Mark Breen. This structure would be necessary to comply
with EU rules on the majority ownership of airlines.
Castlelake's fifth proposal for easyJet came as its takeover bid faced a
so-called "put up or shut up deadline" on July 5, as set down by the
UK’s Panel on Takeovers and Mergers, which regulates takeovers of UK
listed companies. This deadline for a formal bid to be made for easyJet
has now been extended until 5pm on Aug. 3, following a request by
easyJet's board.
EasyJet added there was "no certainty that any firm offer will be made" by Castlelake and advised its shareholders to "take no action" at this
stage.