Private equity giant Apollo overtakes Castlelake in easyJet takeover battle

Apollo has agreed key terms on a possible £5.7 billion cash offer for easyJet, proposing 715p per share, overtaking rival bidder Castlelake. Susannah Streeter, Chief Investment Strategist at Wealth Club, shares her insights.

Apollo has caught the tailwind created by Castlelake’s bid and has now powered ahead, overtaking its rival with a bazooka of an offer that’s sent easyJet shares soaring again in trading today. Given the competing bids, the market clearly believes the airline is worth considerably more than where it was valued just a few weeks ago, before the takeover battle got off the runway.

For Apollo, easyJet is an airline with the potential to reach a much higher altitude. While the carrier has been buffeted recently by higher fuel costs and geopolitical turbulence, it has built a resilient European network, a strong balance sheet and, crucially, a fast-growing holidays business.

That’s likely to be one of Apollo’s biggest attractions. Package holidays generate higher margins and more predictable revenues than airline tickets alone, and Apollo is likely to believe there’s plenty more value to unlock by expanding the business and making even more of the trusted easyJet brand.

For passengers, it’s very much business as usual for now, with flights, bookings and loyalty schemes unaffected while any deal works its way through the regulatory process. For staff, however, the picture is less clear over the longer term. Private equity owners are typically focused on improving efficiency alongside growth, although Apollo has also signalled confidence in management’s current strategy rather than proposing a radical change of direction.

The bidding war underlines how international suitors continue to circle UK-listed companies whose long-term potential they believe the public markets have yet to fully recognise. Apollo clearly thinks easyJet has plenty more fuel left in the tank, and with Castlelake already having shown its hand, there may yet be more twists before this takeover reaches its final destination.

It’s also part of a much broader shift in investing. Private equity firms are increasingly identifying opportunities beyond the public markets, using patient capital to back expansion, acquisitions and operational improvements away from the scrutiny of quarterly earnings.

As more innovative companies choose to stay private for longer, investors are increasingly looking beyond stock markets to access areas of long-term growth. The easyJet battle is another reminder that sophisticated private capital is often prepared to move quickly when it spots value that public markets have yet to fully appreciate.