Apollo Global Management is exploring a potential £3.6 billion takeover bid for EasyJet, according to sources familiar with the matter, sparking a 12% surge in the airline's shares on Friday.
Details of the Potential Offer
The US private equity firm has held preliminary discussions with EasyJet's board, though no formal approach has been made. Apollo is said to be considering a cash offer of around 500 pence per share, valuing the low-cost carrier at approximately £3.6bn. EasyJet's shares closed at 452 pence on Thursday, giving it a market capitalisation of £3.2bn.
Sources caution that the talks are at an early stage and may not lead to a formal bid. Apollo has not yet approached EasyJet's major shareholders, and the company's board is expected to scrutinise any offer carefully.
Industry Context and Challenges
The potential bid comes as the aviation sector recovers from the pandemic, but faces headwinds from rising fuel costs, labour shortages, and operational disruptions. EasyJet has been particularly affected by the grounding of its Airbus A320neo fleet due to engine issues, and has struggled with flight cancellations over the summer.
Analysts note that Apollo's interest may be driven by EasyJet's strong brand, extensive route network, and valuable slots at major airports, particularly London Gatwick. However, the airline's recent financial performance has been mixed, with a return to profitability but ongoing cost pressures.
Market Reaction and Share Performance
EasyJet shares jumped 12% in early trading on the London Stock Exchange, reaching 506 pence, their highest level in over a year. The stock has gained 25% year-to-date, but remains below pre-pandemic levels.
Rival airlines also saw gains, with British Airways owner IAG up 2% and Ryanair rising 1.5%, as the news sparked speculation of further consolidation in the sector.
Regulatory and Strategic Considerations
Any takeover would face regulatory scrutiny, particularly from UK competition authorities. The government has signalled a willingness to protect national carriers, and cross-border ownership rules may apply. Apollo would need to demonstrate that the deal does not harm competition or consumer interests.
Strategic considerations also loom large. EasyJet's CEO Johan Lundgren has previously dismissed takeover speculation, emphasising the company's standalone strategy. However, the board has a fiduciary duty to consider any credible offer.
Apollo's Track Record in Aviation
Apollo has a history of investing in the aviation sector, including a stake in Virgin Australia and ownership of aircraft leasing companies. The firm has also been active in the travel and leisure space, with investments in hotels and cruise lines.
If successful, the EasyJet bid would be one of the largest private equity takeovers of a European airline in recent years. It would also test the appetite of investors for airline assets amid ongoing uncertainty about fuel prices and demand.
EasyJet declined to comment, while Apollo did not immediately respond to requests for comment.
