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FinanceEasyjet shares plunge over 14% on EU probe fears over airline ownership rules
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Shares in Easyjet fell over 14% on Wednesday following reports that the European Union is preparing a review of airline ownership rules, potentially complicating the budget carrier's planned takeover by US investment firm Apollo. Easyjet had indicated it would likely accept an all-cash offer from Apollo, outbidding another US firm, Castlelake. However, an unnamed EU official told Reuters the review aims to prevent foreign investors from gaining effective control of European airlines, which must be majority-owned by European nationals under current regulations. The review was not prompted by Apollo's bid but is part of a broader assessment of airline services. Neither Apollo, Castlelake, nor Easyjet have discussed their proposed deals with EU regulators. The market reaction reflects nervousness over private equity's ability to meet European Commission demands, with few precedents for healthy airline takeovers.
Source report
Shares in EasyJet fell sharply on Wednesday following reports that the European Union is preparing to investigate airline ownership rules, potentially complicating the carrier's proposed takeover by Apollo.
Key Developments
- Stock decline: EasyJet shares dropped more than 14% on the news.
- Takeover context: The London-listed budget airline recently indicated it would likely accept an all-cash offer from US investment firm Apollo, outbidding an earlier proposal from another US buyout firm, Castlelake.
- EU review: Reuters reported, citing an unnamed EU official, that the review may seek to prevent foreign investors from gaining effective control of European airlines.
EU Ownership Rules
EU regulations require that European airlines be majority-owned by European nationals, given their status as strategic national assets. The review is not specifically prompted by Apollo's bid but is part of a broader assessment of airline services, according to City AM.
The EU official told Reuters: "The review is to ensure that foreign investors don't have full control. We need to make sure we have sufficient headroom when it comes to control."
Implications for Bidders
- Castlelake had attempted to circumvent ownership restrictions by establishing a new vehicle run by two European nationals.
- Apollo has not yet disclosed how it would legally structure ownership of the company.
- The EU rules continue to apply to EasyJet due to its Austrian subsidiary.
Market Reaction
"The scale of the move shows how nervous the market is over private equity's ability to meet the European Commission's demands," said Mark Kelly, CEO of shareholder advisory firm MKI Advisors. "Precedents of a healthy airline being taken over are very few and the framework the EC will apply will likely be more rigid than when we have seen comparable insolvent situations."
Regulatory Engagement
The EU official stated that the review would seek to clarify which corporate structures are permitted, with particular focus on control and ownership. According to the official, neither Apollo, Castlelake, nor EasyJet have discussed the details of their proposed deals with European regulators.
Responses
EasyJet and Castlelake declined to comment. Apollo was contacted for comment.
Source
City AMWestern
Part of this Story
Easyjet Shares Plunge on EU Probe Fears Over Airline Ownership Rules