EasyJet Backs £5.5 Billion Castlelake Takeover; Shares Reach Four-Year High

EasyJet shares reached a four-year high on July 6 after the airline agreed in principle to a £5.5 billion takeover offer from U.S. investor Castlelake at £6.90 per share. The bid, Castlelake's fifth proposal, values easyJet at £5.5 billion and marks a nearly 24 percent premium to the July 3 closing price.

It follows an initial offer of £5.60 per share. easyJet had previously described earlier proposals as highly opportunistic. Shares closed at £6.14, up 10 percent from the prior session but below the offer price.

The stock has risen more than 50 percent since Castlelake's interest became public in late May. Castlelake must formalize the offer by August 3 or withdraw under British takeover rules. The firm plans to hold 49 percent of the bidding vehicle, with the remaining 51 percent owned by EU nationals Peter Bellew and Mark Breen.

EU ownership rules require airlines operating in the bloc to be majority-owned and controlled by EU nationals. Analyst John Strickland said the rules are complex and it remains unclear how they will be addressed. JPMorgan analysts raised similar concerns and noted founder Stelios Haji-Ioannou's position is still unknown.

Haji-Ioannou declined to comment on July 6. Aviation analyst James Halstead said there is a high possibility the deal will proceed and called the offer a fair price if easyJet meets medium-term profit targets. Chris Beauchamp of IG described the premium as decent yet still a deep discount to late-2010s share prices.

Castlelake has committed to using best endeavors to secure regulatory clearances.