EasyJet has reached an agreement in principle with a US investment firm over a potential takeover offer worth around £5.2bn.
The no-frills Luton-based airline had previously rejected four takeover offers from Castlelake, which owns a stake of about 2.14% in the carrier through the funds it manages.
EasyJet is one of Europe’s largest airlines. It employs more than 19,000 people, and flies around 1,200 routes across 35 European countries.
When rejecting the previous offers, EasyJet had accused Castlelake of trying to buy it “on the cheap”. However, on Sunday, the two sides said they had reached an agreement in principle on a proposal put forward on 4 July, worth £6.90 per share.
This does not mean a deal has been confirmed. Castlelake now needs to get regulatory clearances and the approvals required for the transaction to go ahead.
One significant regulatory hurdle is that EasyJet is a European company, so by EU rules it needs to be 51% owned by a European company.
Castlelake is a US firm, although it has previously outlined how it would endeavour to comply with this rule.
It has until 17:00 BST on 3 August to either announce a firm intention to make an offer or say it does not intend to do so.
If an offer is made it would need to be put to a shareholder vote.
EasyJet’s board on Sunday said the financial terms of the proposed offer “are at a value that the Board would be minded to recommend to easyJet shareholders”, should a firm offer be made.
Former aviation executive John Strickland said that in addition to being a “profitable, successful airline”, EasyJet had several attractive features.
“It has high brand recognition. Looking at the business itself, it has a substantial fleet of aircraft, numbering over 350 planes, a massive order book – aircraft slots on production lines are hard to get your hands on,” he told the BBC’s Today programme.
In addition they have “a very strong slot position at a number of large, congested airports around Europe, including Gatwick and Paris Charles de Gaulle”.
The most popular slots can be worth tens of millions of pounds, when traded between airlines.
Strickland said he did not expect Castlelake to slim down EasyJet, despite speculation that this might happen.
The airline had said previously that its share price had been “temporarily depressed” – partly due to the impact of the US-Israel war with Iran on the travel sector.
EasyJet shares closed on Friday at £5.58 each. Before news of the first bid emerged in June, EasyJet’s stock had fallen by more than 30% in the past year.
Castlelake has assets under management worth $36bn (£27.3bn).
Announcing the agreement in principle, EasyJet said Castlelake had “emphasised 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”.
