Two American private equity firms are currently in a bidding war over a British budget airline that just reported a 27 percent deepening of its losses. Nothing about that sentence should inspire confidence. And yet, here we are.
Apollo Walks In and Immediately Tops the Offer
EasyJet announced Friday it reached an agreement in principle with U.S. private equity giant Apollo for a £5.7 billion ($7.7 billion) takeover, according to CBS News. That offer, at £7.15 per share, beats out rival American firm Castlelake's bid of £6.90 per share by roughly $1 billion.
Until approximately five minutes ago, Castlelake was the guy. EasyJet had already rejected four of their offers before finally caving on a fifth. The airline opened its books to Castlelake on June 25, gave them access to commercial information, and watched them submit what the board was prepared to recommend to shareholders. Then Apollo showed up with a bigger checkbook.
EasyJet's board said Apollo's proposal delivered a "superior outcome" for shareholders and, as such, the board is "no longer minded to recommend the Castlelake proposal." That's corporate-speak for: sorry, new boyfriend.
The Clock Is Ticking on Apollo
Under U.K. takeover regulations, Apollo now has until August 7 to make a firm offer or walk away entirely. That's the rule. You can't just wave money around indefinitely in British financial markets and keep everyone in suspense.
What this creates, as CBS News notes, is the real possibility of a full-on bidding war between two American private equity firms over a European budget carrier. Castlelake is not obligated to fold just because Apollo showed up. They spent weeks doing due diligence on this thing. They may well come back with a sixth offer.
That is, assuming they still want it. Because here is the part of this story that deserves a second look.
What Exactly Are They Buying?
In May, EasyJet reported that its losses deepened by 27 percent in the first half of the financial year, landing at £377 million, per CBS News. The culprit was the U.S.-Iran conflict, which sent fuel prices surging and scrambled travel plans across the board. The company also warned that the second half of the year will be similarly rough.
Chief executive Kenton Jarvis told investors the airline was "well placed" to weather the turbulence. That is exactly the kind of thing a CEO says right before things get worse. It's practically a genre at this point.
So two of America's largest private equity firms are in a spirited competition to own a money-losing British discount airline in the middle of a geopolitically destabilized fuel market. Great. Love that for everyone.
The Private Equity Playbook, Explained in Two Sentences
Private equity firms do not buy struggling companies because they love aviation or have a soft spot for orange-branded jets. They buy them, load them with debt, cut costs to the bone, extract fees, and eventually either flip the company for profit or leave a hollowed-out carcass behind.
To be fair, Apollo and Castlelake are not identically sinister. Different firms run different strategies. Some genuinely turn companies around. But the pattern is familiar enough that workers, consumers, and regulators tend to tense up whenever a PE firm starts circling a major public company, and EasyJet serves millions of passengers across Europe every year.
The airline was listed in London and was on the verge of being taken private by Castlelake before Apollo entered the frame. Going private means less transparency, less regulatory visibility, and fewer obligations to public shareholders. That is not always catastrophic. It is also not nothing.
What Happens to Castlelake Now?
Castlelake's position is genuinely awkward. They spent months working this deal, submitted five separate offers, got the board to agree, and then watched a competitor swoop in at the last moment with a better number. If this were a rom-com, Castlelake just got dumped at the altar.
They have options. They can walk away. They can raise their bid and try to win the thing back. Or they can sit and wait to see if Apollo blinks before the August 7 deadline. CBS News reports the situation could produce a full bidding war, and given how much work Castlelake has already put into this, a counteroffer would not be surprising.
Either way, EasyJet shareholders are probably feeling pretty good right now. When two well-funded buyers want your company, the price tends to go up. Whether anyone else involved has reason to feel good is a different question.
The Dingo Take
Here is the part where we step back and appreciate the full absurdity of this moment. EasyJet is losing money at an accelerating rate, largely because the geopolitical chaos unleashed by U.S. foreign policy decisions sent fuel costs through the roof. And now, two American private equity firms are in a billion-dollar bidding war to own it. The people who helped break the thing want to buy the thing. You could not write this.
Private equity taking over major airlines has a history worth examining. It doesn't always end in disaster, but it frequently ends with cost-cutting that passengers feel immediately, labor disputes that drag on for years, and ownership structures so layered with debt that any turbulence, literal or economic, hits the company twice as hard. EasyJet already has £377 million in half-year losses. Whoever wins this auction is going to want that money back somehow. Guess who flies EasyJet.
Castlelake and Apollo will both tell you they have long-term plans to strengthen the airline, create value, and blah blah blah. Maybe one of them even means it. But the August 7 deadline is coming, the bids are climbing, and somewhere a spreadsheet is already mapping out which routes aren't profitable enough to keep. Watch this one closely.
