Analysis: EasyJet takeover may not be straightforward

Confirmation that the easyJet board has accepted a £5.7-billion takeover bid by US investment fund Apollo appears to settle debate about the airline’s future ownership.

Funds operated by Apollo Global Management will de-list the carrier from the London Stock Exchange, it is hoped by the first quarter of next year.

However, it may not be that simple. Apollo and easyJet must comply with EU rules on the ownership and control of airlines which require a carrier be majority owned and run by EU nationals. Since Apollo is based in New York it may own a maximum 49.9% of easyJet. 

The remaining 50.1% must be owned in Europe, and Europeans must have a “decisive influence” on the running of the airline, according to EU rules.

Apollo has the support of easyJet founder Stelios Haji-Ioannou, who personally retains a 3.9% stake in the airline, and his family who collectively hold 15.3%.

The US fund, which manages assets worth more than $1 trillion, can count on the easyJet directors’ shares but they collectively hold a mere 0.06%. Apollo proposes an EU trust will hold a further 5% of the carrier as part of a ‘management incentivisation plan’.

That would take the EU portion of Apollo’s takeover structure to 21% – leaving it requiring a further 29% be held by EU nationals. The bid documents suggest these will be existing shareholders who roll-over stakes in the publicly listed airline into the privately owned one.

But that requires they accept “an immediate dilution” of up to 5% in the value of their shares – to create the EU trust – accept that their ‘roll-over’ shares confer fewer rights, and that easyJet take on up to £3 billion in debt to finance the deal.

As of this week, ten institutional investors held 25% of easyJet shares. For the takeover to meet EU ownership rules, a sizeable proportion of Europe-based institutional investors have to agree to roll-over their holdings and forego the £7.15-per-share Apollo is offering.

That is 43p above the airline’s share price early this week and more than double what it was in May before rival US fund Castlelake made an initial bid for easyJet. If shareholders of sufficient size do not buy into retaining their stakes but take the money, meeting the EU requirements could be a stretch.

Initial shareholder reaction appeared muted, with one large investor telling the Financial Times: “The price is disappointing, but I don’t think we have much of a choice.”

Assuming the takeover is settled on these terms, it must then be signed off by regulators not just in Brussels but in the UK, Germany, Austria and Switzerland. This seems unlikely by the end of March 2027.

In the meantime, reports of how Apollo intends to boost easyJet returns by taking the carrier upmarket and exploring agreements with long-haul carriers are clearly directed at investors. 

One report had easyJet discussing a tie-up with Virgin Atlantic – an attractive idea but fairly limited when Virgin no longer operates at easyJet’s biggest UK base, Gatwick.