EasyJet Takeover Suitor Faces $1 Billion Brand Fee

The potential buyer of easyJet, US private equity firm Castlelake, faces a significant cost of over £1 billion to continue using the "easy" brand name, which is owned by the airline's founder, Sir Stelios Haji-Ioannou. This figure comes as Castlelake seeks to finalize its £4.9 billion bid for the low-cost carrier.

EasyJet's board recently rejected Castlelake's initial offer but has granted the firm limited access to the airline's financial records. This access is intended to allow Castlelake to submit a more attractive proposal by next Sunday.

A key element under scrutiny is a licensing agreement established in 2010. Under this deal, easyJet pays Haji-Ioannou's easyGroup an annual royalty of 0.25 percent of its total revenues for the next 50 years. In the past year, this royalty amounted to £25 million.

If revenue growth remains steady, easyJet could owe an additional £850 million over the remaining 34 years of the contract. This sum is projected to increase if the airline's sales expand. It remains unclear whether the licensing agreement includes a change-of-control clause that would permit a new owner to renegotiate the royalty terms.

Sir Stelios, who retains a 15 percent stake in easyJet and is its largest shareholder, has a history of engaging in trademark disputes and legal actions concerning the use of the "easy" prefix. Castlelake's current offer, which is its fourth, values his shareholding at £735 million. However, reports suggest that the easyJet founder is seeking a substantially higher bid to consider selling his stake.