EasyJet shares soar after £5.5billion takeover approach wins board backing

EasyJet shares have surged by 12 per cent in early trading after the budget airline announced it had reached an agreement in principle with US investment firm Castlelake over a potential £5.5billion takeover.

The proposed deal values the Luton-based carrier at around £5.5billion, with Castlelake offering £6.90 a share, representing a significant premium to Friday's closing price of £5.58.

EasyJet's board said it would be minded to recommend the offer to shareholders if Castlelake submits a formal bid on the agreed terms.

The announcement follows months of negotiations between the two companies and could pave the way for one of the biggest takeovers in the European aviation sector in recent years.

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Castlelake, which manages assets worth approximately $36billion, already owns around 2.14 per cent of EasyJet through investment funds.

The agreement follows a lengthy period of negotiations after Castlelake submitted four previous takeover proposals, all of which were rejected by the airline's board.

EasyJet had previously criticised the investment firm's earlier approaches, saying it was attempting to acquire the business "on the cheap".

The latest proposal, submitted on July 4, was the first to satisfy the board's valuation expectations.

Before reports of the initial takeover interest emerged in June, EasyJet's shares had fallen by more than 30 per cent over the previous 12 months.

The airline has previously said its share price had been affected by wider uncertainty across the travel sector, including disruption linked to the conflict involving the United States, Israel and Iran.

The proposed takeover comes at a challenging time for the aviation industry, with airlines continuing to face higher fuel costs and pressure on profit margins.

Despite the agreement in principle, several hurdles remain before the transaction can be completed.

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European Union ownership rules require airlines based in Europe to remain at least 51 per cent owned by European investors, presenting a key challenge for the Minneapolis-based investment firm.

Castlelake has previously outlined proposals designed to meet those requirements, although details have not been made public.

The position of EasyJet founder and largest shareholder Stelios Haji-Ioannou has also yet to be clarified.

Under takeover regulations, Castlelake has until 5pm on August 3 to either announce a firm intention to make an offer or confirm that it does not intend to proceed.

Any formal takeover would also require shareholder approval before it could be completed.

EasyJet is one of Europe's largest airlines, employing more than 19,000 people and operating a fleet of more than 350 aircraft.

The carrier serves more than 1,200 routes across 37 countries throughout Europe.

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".

The investment firm also said it would use its best efforts to secure the necessary regulatory approvals should it decide to proceed with a formal offer.

If completed, the transaction would take EasyJet into private ownership and mark one of the most significant corporate deals in the European aviation industry in recent years.

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