The board has backed Apollo's higher offer over a rival £5billion approach from Castlelake
EasyJet's board has backed a £5.7billion takeover by US private equity giant Apollo after the investment firm outbid rival suitor Castlelake with a higher all-cash offer.
The American firm is offering £7.15 per share for the budget airline, comfortably exceeding Castlelake's £6.90 per share proposal, which had secured agreement in principle only days earlier.
EasyJet's directors have unanimously indicated they intend to recommend Apollo's proposal to shareholders, subject to the completion of due diligence and the finalisation of definitive documentation.
The board has also withdrawn its support for Castlelake's proposed transaction following Apollo's higher offer.
Under UK takeover rules, no formal offer has yet been made and shareholders have been advised to take no action at this stage.
Apollo's proposal represents an 81 per cent premium to easyJet's closing share price of £3.94 on May 28, the final trading day before Castlelake's initial approach triggered a formal offer period.
The proposed takeover price is also 22 per cent above the airline's highest share price during the past four years.
Eligible shareholders who wish to maintain an interest in the airline could be offered the opportunity to roll their existing shares into the private ownership vehicle Apollo plans to use to acquire easyJet.
Apollo said taking easyJet private would allow the airline to accelerate its long-term growth while preserving the brand and creating additional opportunities for employees.
The bidding contest for easyJet has unfolded over the past six weeks, with Castlelake making a series of unsuccessful approaches before securing provisional backing for its latest proposal.
The aviation-focused investment firm first disclosed its interest on May 29 before submitting offers of £5.60, £6.00, £6.25 and £6.50 per share, all of which were rejected before easyJet granted limited access to commercial information.
Castlelake's fifth proposal of £6.90 per share secured agreement in principle over the weekend, sending easyJet shares to a 52-week high on Monday after gaining more than 10 per cent.
Industry observers had questioned whether Castlelake's ownership structure could satisfy European Union rules requiring airlines operating within the bloc to be majority-owned and controlled by European nationals.
The firm had enlisted former easyJet executive Peter Bellew and aviation veteran Mark Breen as part of efforts to address those regulatory concerns.
The investment firm has described easyJet as one of the most attractive opportunities in global aviation and said it supports the current management team's long-term strategy.
Apollo also backs plans to modernise the airline's fleet with larger aircraft, increase ancillary and loyalty revenues, and continue expanding the easyJet Holidays business.
The firm has also said it intends to preserve the existing brand licence agreement with easyGroup, the investment company controlled by easyJet founder Sir Stelios Haji-Ioannou.
The Haji-Ioannou family owns a 15.3 per cent stake in easyJet, making it the airline's largest shareholder.
Under takeover rules, Apollo has until 5pm on August 7 to either announce a firm offer for easyJet or withdraw from the process.
There is no certainty that Apollo will ultimately submit a binding offer.
