EasyJet agrees in principle to £5b US takeover offer

London: British budget airline EasyJet says it has reached an agreement in principle for a takeover by US private equity firm Castlelake after receiving a new beefed-up proposal valuing the company at over £5 billion ($6.7 billion).

The EasyJet board said Castlelake's fifth proposal was for £6.90 per share, which they were "minded to recommend" to shareholders if a firm offer is made by August 3, the deadline set for the deal.

Castlelake, which manages around $38 billion in assets, notably in the aviation sector, had made four previous proposals, all rejected by EasyJet, the no-frills carrier known for its distinctive orange and white livery.

The airline, founded by entrepreneur Stelios Haji-Ioannou in the 1990s as Europe's budget airline sector took off, called the third offer "highly opportunistic", coming after its share price had fallen and company losses increased after the Middle East war sent jet fuel costs rocketing.

According to the Financial Times, Castlelake is a major player in aircraft leasing, with a fleet of 375 planes rented out to airlines including Etihad, Qantas, Air India Express, Frontier and Viva. 

In 2023, Castlelake acquired around 32 percent of Scandinavian airline SAS. This stake is in the process of being bought back by Air France-KLM. 

Despite rebuffing the early offers, EasyJet opened the door to talks on June 25, agreeing to give the US fund access to commercial information in the hope of securing a more attractive proposal. 

"Castlelake has 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 carrier said in its statement on Sunday.

"Castlelake is supportive of easyJet's fleet modernisation programme, which it regards as central to the Company's long-term competitiveness, efficiency and sustainability objectives."

But the statement cautioned "there can be no certainty that any firm offer will be made" by the August 3 deadline, which was extended from Sunday.

In May EasyJet reported losses deepened by 27 percent in the first half of the financial year to £377 million as the US-Iran conflict sent fuel prices soaring and upended travel plans.

The company warned that the second half of the year would also be affected, though chief executive Kenton Jarvis said the airline was "well placed" to ride out the turbulence.

Budget rival Ryanair, by contrast, enjoyed a profit jump of 35 percent on its full year return, though it too warned of problems ahead caused by the Middle East war.