EasyJet: Apollo makes a counter-offer of £7.15. Castlelake outbid. Shares soar

Apollo has also given assurances that it will comply with European requirements regarding the ownership and control of airlines, a necessary condition for an airline to retain its traffic rights within the European Union. As a US private equity investor, the fund cannot, in fact, directly hold control of a European airline without a structure that complies with EU regulations. Castlelake had addressed this very issue by adopting a different governance structure.

In presenting its proposal, Apollo ruled out the possibility of a break-up of the group, despite the fact that some observers consider the value of the individual businesses to be higher than that currently reflected in the group’s total market capitalisation. The fund reiterated its intention to support the company’s business plan, including the growth of the Holidays division. “The management’s operational and commercial ambitions can be accelerated through access to additional capital and long-term strategic planning made possible by the company’s status as a private entity,” Apollo stated.

The offer also provides for the possibility for shareholders to transfer their shareholdings to the special purpose vehicle that would acquire easyJet, thereby retaining a stake in the capital and the associated voting rights. The trademark licence agreement between easyJet and easyGroup – the holding company of founder Stelios Haji-Ioannou, the airline’s largest shareholder with a stake of around 15 per cent – will also remain in force. The agreement provides for the payment to easyGroup of a royalty equal to 0.25 per cent of the airline’s revenue for the use of the brand.

On the financial front, however, there are still concerns. According to Alex Irving, an aviation analyst at Bernstein, at the valuations proposed by Apollo, “a major cost restructuring and a significant improvement in profitability, well beyond our current forecasts, would be required for the deal to be economically justified”.

Both Apollo and Castlelake have a long-standing presence in the aviation sector. Castlelake is active in aircraft leasing and was one of the co-investors in Air France-KLM’s acquisition of the Scandinavian airline SAS. Apollo, on the other hand, operates a global aircraft leasing and financing platform with offices in New York, Dublin and Singapore, and has invested in Sun Country Airlines, Aeromexico and Atlas Air Worldwide.