The board of easyJet has given the green light to a possible £5.7bn offer from the US private equity firm Apollo, as the low-cost airline becomes the subject of a surprise bidding war.
The company’s board said on Friday that it was “minded to recommend” the potential all-cash offer, which values the business at £7.15p a share, to shareholders.
Earlier this week, easyJet’s board agreed “in principle” to accept a £6.90 deal from Castlelake, after the US private equity firm upped its offer for the fifth time. However, analysts said that the offer, worth £5.5bn, undervalued easyJet.
On Friday, the airline’s board switched direction, to recommend Apollo’s approach. “The easyJet board has carefully considered the proposed cash offer together with its financial advisers and has unanimously concluded that the financial terms of the proposed cash offer are at a level that it would be minded to recommend to easyJet shareholders,” the company said. “Accordingly, the easyJet board is no longer minded to recommend the Castlelake proposal.”
The latest offer also allows current shareholders to remain invested under Apollo’s ownership should the deal proceed, rather than being forced to divest when it delists.
Apollo signalled that it would back easyJet’s current strategy and management and was not looking to break up the company.
“Apollo believes in easyJet’s existing strategy of evolving and strengthening the low-cost carrier model, most notably through upgrading the fleet, enhancing the ancillary and loyalty offering, and scaling holidays into a structurally differentiated earnings stream,” the company said.
“Apollo recognises the important contribution that easyJet’s management team, alongside easyJet’s employees, have made towards the company’s successes. Apollo places a high value on people and believes that identifying and retaining key staff within the easyJet group will be of paramount importance.”
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It has until 7 August to make a firm offer for the airline.