The $7.7 billion bid surpasses Castlelake! Apollo enters a bid to buy easyJet (ESYJY.US), and the two major US private equity firms may start a battle

The Zhitong Finance App learned that easyJet (ESYJY.US) has received a new purchase offer of 715 pence per share from the US private equity firm Apollo Global Management (APO.US), which is higher than Castlelake's offer. This unexpected turn has brought new variables to the British low-cost airline takeover war, and also indicates that two US private equity firms may compete.

Given that Apollo's £5.7 billion (US$7.7 billion) offer is more advantageous, easyJet said in a statement on Friday that it “no longer recommends shareholders accept Castlelake's acquisition plan.” The statement also stated that as far as Apollo's acquisition plan is concerned, “the proposed cash acquisition transaction conditions are at a level worthy of recommendation to easyJet shareholders.”

Previously, easyJet and Castlelake had many rounds of negotiations, and the latter continued to raise the offer to facilitate the deal. According to reports, on July 5, easyJet announced that it had agreed “in principle” to the 5th takeover offer issued by Castlelake of the United States. The price was £6.90 per share. The total valuation of easyJet reached 5.2 billion pounds (about 6.9 billion US dollars), and a fully diluted valuation of about 5.5 billion pounds (7.34 billion US dollars), a premium of about 73% over the closing price before it disclosed interest on May 29

If the deal is successful, it will delist the British low-cost airline, which has a 31-year history and was launched in 2000, and allow management to modernize its fleet, expand its holiday business, and restructure costs under a private equity framework. For shareholders, this is locking in premium exits under short-term macroeconomic shocks.

EasyJet's most attractive assets include a fleet of modern Airbus A320 series aircraft; it holds hundreds of aircraft purchase orders while enjoying scarce peak take-off and landing times at London, Milan, and Geneva hubs.

Apollo said, “The privatization structure can provide easyJet with incremental capital channels and support the company to carry out longer-term business and strategic planning, thereby greatly speeding up the implementation of management's various operational and commercial development goals.”

Apollo said that the airline's current shareholders can choose to replace their holdings with so-called retained shares; Apollo's funds will hold investments in easyJet through this retained equity structure.

Apollo also stated that efforts will be made to meet the necessary conditions for overseas investors to hold European airlines. Regulations require airlines to be held by European entities, and Castlelake has previously tried to overcome this hurdle by bringing in two Irish Airlines executives.

EasyJet was founded in the 90s of the last century and is the second-largest low-cost airline operator in Europe after Ryanair. As aviation fuel costs soared and people's travel plans were disrupted due to the war in the Middle East, the company's losses increased 27% year over year to £377 million in the half fiscal year ending March.