US investor Apollo Global Management (NYSE:APO) has swooped in with a 715p per share offer for easyJet (LON:EAJ), outbidding current suitor Castlelake. The easyJet board has subsequently said it is ‘no longer minded to recommend the Castlelake proposal’.
‘Significant long-term potential’
Apollo’s cash offer trumps the fifth and latest proposal from Castlelake, which was pitched at 690p. It also represents a significant premium to Bloomberg Intelligence’s 640p per share valuation based on the airline’s projected 2028 earnings.
The US asset manager calls easyJet ‘one of the most attractive businesses in the global aviation sector with significant long-term growth potential’. It also backs the firm’s strategy of upgauging its fleet, enhancing its loyalty offering and scaling Holidays into a differentiated earnings stream.
Finally, Apollo says management’s ambitions ‘can be substantially accelerated via access to incremental capital and longer-term business and strategic planning’ under private ownership.
We said last week easyJet shareholders should remain seated and wait for further announcements. There were rumblings a rival bidder might emerge, possibly another European carrier, with a view to breaking up the group.
Apollo’s entry raises the stakes considerably, and it is making all the right noises in terms of committing to the airline’s future. It says it recognises the important contribution of the management and ‘looks forward to partnering with employees to accelerate and enhance easyJet’s continued success’.
What it hasn’t addressed is how it aims to meet the issue of control. Saying it will take ‘all necessary steps’ to meet EU requirements and proceed on a ‘best endeavours’ basis is fine. However, as a US company, Apollo can’t own a majority stake in easyJet so it needs to find a workaround.
Read the press release here: https://corporate.easyjet.com/home/default.aspx
