EasyJet agrees $7.7 billion takeover by Apollo as Castlelake walks away

Apollo Global has agreed to buy easyJet in a £5.70 billion deal, valuing the European budget airline, after rival suitor Castlelake abandoned its pursuit.

Apollo Global has agreed to ‌buy easyJet ​in a deal that values the European budget airline at about £5.70 billion ($7.7 billion), the companies said on Thursday, as rival suitor Castlelake abandoned its pursuit.

The deal ends months of uncertainty surrounding one of Europe's biggest low-cost airlines as the industry grapples with rising costs from the Iran war. Easyjet is ‌also the latest in a string of London-listed companies that have been taken private by private equity firms and largely U.S. companies in recent years as the FTSE 100 share index has traded at a discount to its U.S. counterpart.

"Having carefully reviewed the proposal by Apollo, my family members and I have decided to support the recommended acquisition announced by the easyJet board," easyJet founder Stelios Haji-Ioannou said in ‌a separate statement after speculation of his approval. EasyJet's board, advised by Evercore, unanimously recommended the cash offer, saying it considered the terms to be fair and reasonable.

"While we remain confident in the ‌strength of our business and the opportunities ahead, we believe this offer appropriately recognises the quality of the business we have built and delivers immediate, certain and attractive value for shareholders," easyJet Non-Executive Chair Stephen Hester said in a statement. Apollo, which manages about $1.05 trillion in assets and has previously invested in Sun Country Airlines, Aeromexico and Atlas Air, said it plans to accelerate easyJet's commercial ambitions — including expanding its fast-growing holidays business — under private ownership.

Castlelake earlier on Thursday withdrew from the takeover race without ⁠giving a ​reason. It had tabled five bids for easyJet before ⁠Apollo entered the fray in July, topping Castlelake's £5.5 billion proposal and securing the backing of the airline's board.

EU OWNERSHIP DILEMMA Investors and regulators have raised questions about how Apollo will comply with European Union rules on airline ownership, given easyJet's bases across ⁠the bloc. EasyJet's flying rights within the bloc depend on the airline remaining majority owned and controlled by EU interests.

Following the deal, Apollo anticipates that the family of Haji-Ioannou and other shareholders remaining invested will hold between 45.1% ​and 49.9% of the ordinary capital of the purchasing vehicle. An EU management trust will hold up to 5%, Apollo's funds will hold the rest, up to a maximum of ⁠49.9%.

EasyJet's main base is in Britain and Britain's Civil Aviation Authority said it has engaged with the parties involved in the deal. EasyJet shares, which have rallied more than 65% since the initial takeover interest was disclosed, were still trading below Apollo's offer price ⁠at ​670 pence by 1608 GMT.

The offer represents a premium of about 81% to easyJet's closing price of £3.94 on May 28, the last trading day before Castlelake's interest became public. "I think the market probably thinks that there's an execution risk because of the question of ownership control," aviation analyst James Halstead said, calling easyJet's current share price "unfair", as it is so low.

PRIVATISATION COULD PROVIDE SHIELD ⁠FROM IRAN WAR Still, analysts said that a move to take the company private might shield it from some of the fallout of the war in Iran.

"A delisting would allow easyJet ⁠to be less tied to quarterly earnings reporting and ⁠less exposed to the turbulence the sector is likely to face once higher jet fuel costs begin to be reflected more clearly in fares," said Andrea Giuricin, CEO of transport consultancy TRA Consulting. Halstead also said that a deal with Apollo could provide easyJet with better funds and potentially leasing ‌agreements.

($1 = 0.7424 pounds)