Apollo agrees to buy UK airline EasyJet in $7.7 billion deal as Castlelake withdraws

Shares in EasyJet rose about 3.1% in afternoon trade in London on Thursday after the U.S. private equity firm Castlelake said it had pulled the plug on plans to buy the U.K. budget airline, clearing the path for rival bidder Apollo Global Management. Apollo is now expected to take EasyJet private in a deal valuing the airline at around $7.7 billion, with the transaction expected to be completed by the end of the first quarter next year. In an earlier statement to the London Stock Exchange, Castlelake said that, following careful consideration, it does not intend to make an offer for the carrier. That sent EasyJet sliding more than 6% before rebounding. Under the terms of the deal, EasyJet investors will be entitled to £7.15 per share ($9.63), which represents a premium of 54% to its closing price on February 27 — the last business day before the outbreak of the current Middle East conflict. Apollo tabled an offer last month, just days after the airline said it had agreed in principle to a Castlelake bid valuing EasyJet at $7.3 billion. Castlelake's bid, which would have shaken up the European aviation sector, was an improvement on an earlier $6.64 billion proposal, which was rejected by EasyJet back in June. Private equity interest has helped lift EasyJet shares lately, which were up by almost 50% at Wednesday's close in London. The 31-year-old airline is seen as an attractive takeover target for private equity bidders, holding valuable landing slots at key European airports including London Gatwick, Paris and Geneva. Castlelake is a major lender to airlines and has leased airplanes to about 200 carriers. "We welcome Apollo's commitment to our business and our people, and believe that its experience in the aviation sector makes it a strong partner for easyJet as we accelerate our growth plans and continue to deliver great value and service for our customers," said EasyJet CEO Kenton Jarvis. Alex van Hoek, partner and European private equity lead at Apollo, added: "EasyJet is a leader in European aviation, having built a differentiated market position through its compelling customer proposition, expansive network and strong brand." "Apollo strongly supports EasyJet's commitment to enhancing the connectivity of travellers throughout Europe and the UK and the important role that its employees play in serving customers. "We are proud to be trusted to play a lead role supporting the easyJet Group in this next phase of its growth and furthering its important contribution to the European and UK aviation sectors." — CNBC's Mike Sheen contributed to this story.