Castlelake Gains More Time in Bidding War for EasyJet

US asset manager Castlelake has been granted an extension until Friday to submit a revised offer in the ongoing bid battle for EasyJet, according to an announcement from the airline. EasyJet confirmed that Castlelake has until 5 p.m. on Friday to present an improved bid, a deadline previously set for Friday.

The airline's board continues to recommend that shareholders accept the £5.7 billion offer from rival suitor Apollo. EasyJet had previously rejected four bids from Castlelake, labeling them "highly opportunistic" and an attempt to secure a deal "on the cheap." However, the airline later agreed to a £5.5 billion offer from Castlelake, equating to £6.90 per share, in early July. Shortly thereafter, Apollo submitted a higher bid of £5.7 billion, which the EasyJet board deemed a "superior outcome" for its investors. Both prospective buyers have been granted access to the airline's business for due diligence.

This bidding war follows a significant slump in EasyJet's share price this year, making it a target for potential acquisitions. The airline reported a 70% decrease in profits for the three months ending in June, with profits falling to £85 million. This decline was attributed to a surge in fuel prices, fueled by the conflict in the Middle East, and a subsequent drop in customer demand. While there was a rise in late bookings during that period, it did not fully offset the decrease in reservations following the outbreak of war.

Questions also persist regarding ownership structures, even if a formal takeover is agreed upon this week. Reports indicate that the European Union is preparing to review ownership rules to prevent foreign investors from gaining control. These rules remain applicable to EasyJet, which established an Austrian subsidiary to maintain its ability to operate flights within the EU post-Brexit.

Any potential bid would also likely require the support of the airline's founder, Stelios Haji-Ioannou, and his family, who collectively hold a 15.3% stake. Should Apollo emerge as the successful bidder, it would expand its existing portfolio of airline investments. The private equity firm co-owns Atlas Air and, in the previous year, its private credit arm provided a $745 million loan to Virgin Atlantic for its Heathrow airport slots.