easyJet shares jumped nearly 15% as Apollo entered the race to acquire the company

Shares of British low-cost carrier easyJet soared nearly 15% in London as asset manager Apollo joined the race to acquire the airline following interest from U.S. investment firm Castlelake. Its competing bid to acquire easyJet for £5.7 billion ($7.64 billion) outbid Castlelake’s proposal, which had offered a similar deal worth £5.5 billion ($7.34 billion).

As a result, easyJet announced that its board of directors had tentatively approved the deal for Apollo to acquire the low-cost carrier and had withdrawn its recommendation to shareholders regarding the agreement with Castlelake.

In a joint statement, easyJet and Apollo announced that each easyJet share would be valued at £7.15 as part of the deal, representing an 81% premium over the airline’s closing share price on May 28 — the date preceding the day Castlelake first expressed interest in acquiring easyJet.

In addition, as an alternative to a cash payment, Apollo may also offer certain easyJet shareholders the option to “transfer their existing easyJet shares into a structure through which Apollo’s funds will hold their investments” in the airline. These terms are currently under discussion.

Apollo has until August 7 to make an official offer to easyJet or withdraw from the deal.

“The offer [from Apollo] provides the best outcome for easyJet shareholders, as it offers a higher price than Castlelake’s latest offer of £6.90 per easyJet share,” the airline said, emphasizing that the airline’s board of directors is now leaning toward recommending that shareholders approve the deal with Apollo.

Castlelake declined to comment on this matter when contacted by The Wall Street Journal.

As of this writing, easyJet shares are up 14.6% in London. Apollo's offer is about 22% higher than the company's closing price on Thursday, according to CNBC.

The acquisition of the low-cost carrier Apollo increases the likelihood that easyJet’s growth will continue as planned, according to a Bernstein research note published Friday morning. “However, in this case, for the deal to make sense at this price, it would require a heroic cost restructuring and a sharp rise in profits, significantly exceeding our current forecasts,” they added.

CNBC notes that discussions about a potential deal are taking place against the backdrop of ongoing pressure on the global aviation sector: since the outbreak of war in the Middle East, jet fuel supplies have declined. Last month , the International Air Transport Association also warned that the profitability of global airlines could be cut in half this year due to rising fuel costs for industry players.

This article was AI-translated and verified by a human editor