UK budget airline EasyJet has announced it has reached a preliminary agreement on a takeover offer from US private equity firm Castlelake.

The offer from Castlelake is for 690 pence per share in cash, valuing EasyJet's equity at approximately £5.2 billion, with a maximum fully diluted valuation reaching up to £5.5 billion (around $6.7 billion).

This represents a 73% premium to the share price when Castlelake first disclosed its interest on May 29.

Sequence of Bids

This marks the fifth proposal from Castlelake.

EasyJet had previously rejected four earlier offers at 560p, 600p, 625p, and 650p per share, deeming them highly opportunistic.

It was only with this fifth, increased offer that EasyJet granted Castlelake limited access to its commercial data, leading to the agreement in principle being reached on Sunday.

Board Recommendation and Conditions

The board of EasyJet has stated that if Castlelake submits a formal offer by August 3, it will recommend that shareholders accept it.

However, the statement also emphasized that there is no certainty at this stage that a formal offer will ultimately be made.

Airline Profile and Recent Performance

EasyJet is one of Europe's largest low-cost carriers, operating a fleet of 355 aircraft on over 1,200 routes with approximately 19,000 employees.

Affected by soaring fuel costs due to Middle East conflicts and weaker summer bookings, the company reported a widened first-half loss of £377 million.

Its share price has fallen more than 30% over the past year.

Acquirer Structure and Compliance

Castlelake manages around $38 billion in assets and is a major player in aircraft leasing, having leased planes to roughly 200 airlines.

To comply with EU aviation rules requiring that airlines be majority-owned and controlled by EU nationals, Castlelake will hold only a 49% stake in the acquisition vehicle.

The remaining 51% will be held by two EU-based industry figures, including former EasyJet Chief Operating Officer Peter Bellew.