EasyJet agreed to a £5.7bn Apollo takeover last week, and the small print now shows how shareholders who roll their stakes into the new vehicle can lose influence. Their rights will be diluted under the new ownership structure, while the deal also loads EasyJet with more than £3bn of debt and puts the rating from Moody’s under review.
£5.7bn is the price Apollo agreed to pay, more than 80 per cent above the airline’s closing share price the day before Castlelake’s interest first emerged. That premium explains why the board backed the cash offer, but it also explains why holders who stay in the structure are now facing a different bargain: cash today, or a stake with weaker protections tomorrow.
Apollo and Stelios Haji Ioannu
Last Thursday, Apollo filed the terms that set out how control will work inside EasyJet Group. Stelios Haji Ioannu, EasyJet’s founder, will be able to steer decisions on director appointments and investment in EasyJet Group because his stake is above a 20 per cent threshold, while Apollo and Stelios Haji Ioannu will both have that influence. Most other rolled-over shareholders will not.
14 per cent is the dividend Apollo can pay itself each year from its stake, and the agreement says rolled-over shares will be subordinated so that payment can be made without handing any cash to other shareholders. That turns the new vehicle into a hierarchy: Apollo at the top, then the rest of the rolled-over holders below it.
EasyJet Group and EU rules
More than £3bn of debt will sit on EasyJet’s balance sheet because Apollo is using borrowings to help finance the transaction. That is the piece Moody’s is now reviewing, alongside the ownership structure itself, because European law requires airlines to be majority-owned or controlled by EU investors.
Shareholders will keep voting rights at future general meetings, but they will not have input on director appointments or investment decisions in EasyJet Group. On Friday, it emerged that non-EU investors risk having their stakes unilaterally seized by EasyJet’s new management to avoid breaching the bloc’s ownership rules, while the compulsory transfer and compulsory buy-back provisions will not apply to Apollo or their affiliates.
The practical question now is simple: how many EasyJet investors will choose cash rather than roll their holdings into a structure that leaves them with votes, but less say over who runs the airline and how capital is deployed? The answer will determine how wide the dilution runs, and how much of the new EasyJet is actually owned by shareholders willing to accept those limits.
